The central bank has started investigating the causes of volatility in the country's money market despite a large flow of fresh fund through buying back of government securities and repo auctions, officials said.
The Bangladesh Bank (BB) is scrutinising deposit/advance ratio, generally known as AD ratio, asset-liability management situation and implementation of the core risk management guidelines.
"We will take stern action against the banks concerned if irregularities are detected in fund management," a BB senior official told the FE Monday.
He also said that the BB is examining inter-branch reconciliation position of the banks along with internal compliances situation.
The inter-bank call money rate stood higher at 19 per cent during the last couple of days indicating shortfall of the liquidity in the money market.
On May 7 last, the central bank started buying back government securities aiming to inject fresh funds into the money market.
The central bank has so far injected around Tk 25.06 billion into the money market through buying back of the government approved securities from the banks and financial institutions, they added.
Under the arrangement, the central bank will buy only four government bonds and four treasury bills from the banks and financial institutions.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year duration - are being traded in the market.
On the other hand, four treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 28-day, 91-day, 182-day and 364-day maturity periods.
Officials of the commercial banks, however, said that overnight borrowing from the money market might be allowed as part of the treasury activities. But they opposed to lend such fund to other businesses.
"We should consolidate our asset-liability position to avoid any financial risk," a senior treasury official of a private commercial bank told the FE.
