Banks getting prepared to meet higher demand for funds ahead of Eid

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Siddique Islam
Most commercial banks are holding surplus funds with them to avoid any possible shortfall in cash ahead of the Eid-ul-Azha festival.
Few non-primary dealer (PDs) banks participated in 28-day Treasure Bills (TB) auction, held in the Bangladesh Bank (BB) Sunday due to the upcoming Eid festival, treasury officials said.
A total of Tk 1.22 billion was accepted for the 28-day TBs, offered by the commercial banks including a PD and non-banking financial institutions while Tk 3.78 billion was devolved to the PDs.
Earlier, the central bank selected nine PDs - eight banks and a non-banking financial institution (NBFI) - to handle government-approved securities in the secondary bond market.
"We are taking precautionary measures to avoid any shortfall of liquidity ahead of the Eid festival," a senior treasury official told the FE, adding that the demand for cash normally increases before the Eid festival.
A large number of banks are taking preparation to maintain adequate liquidity before the Eid festival to avoid any fund crisis, the official observed.
The call rate ranged between 6.50 per cent and 10.50 per cent Sunday unchanged from the previous working days, while most of the deals were settled at 6.50 per cent.
The call money rate may move slightly because of increasing pressure on normal withdrawal of liquidity and disbursement of loans for purchasing hides and skin of sacrificial animals during the Eid festival.
Meanwhile, the excess liquidity in the banking sector has decreased by Tk 11.50 billion over the past three months, indicating improvement in the investment scenario of the country.
Excess liquidity of the scheduled banks stood lower at Tk 131.29 billion as end of August last against Tk 142.79 billion by the end of June 2007, according to the central bank statistics.
"The overall excess liquidity in the banking sector recorded a decaling trend after July last following repeated instructions to the bankers by the central bank to invest such fund in the productive sectors," a BB senior official told the FE.
The official also said the amount of excess liquidity may fall further in the near future due to increase of credit disbursement in some real sectors including agriculture and housing.
The trade financing also increased in the recent months to meet the growing demands for food grains and gasoline products, the official noted.
Sources, however, said the intervention in the inter-bank foreign exchange market by the central bank has also helped reduce the amount of liquidity in the banking system.
The central bank has, so far, sold a total of US$182 million, equivalent to Tk 12.487 billion, to the commercial banks as part of its ongoing market intervention.
The central bank started intervening in the inter-bank foreign exchange market through selling of the US dollar since October 29 last aiming to keep the market stable.