The overall excess liquidity with commercial banks fell slightly in January last because of the downtrend of bank deposits, officials said.
The excess liquidity dropped by more than 5.0 per cent to Tk 1.08 trillion as of January 29 last from Tk 1.14 trillion in December last. On November 27 last the excess liquidity stood at Tk 1.09 trillion.
"Most of the excess liquidity funds have been invested in government securities as the risk-free investments," a senior official of the Bangladesh Bank (BB) told the FE.
The excess liquidity does not necessarily mean idle money for the banks.
The excess reserve, generally known as the excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 30 billion (3,000 crore) of the total excess liquidity.
The amount of excess reserve can be termed idle money for the country's 56 commercial banks.
On the other hand, the overall deposits excluding inter-bank transactions fell by 1.08 per cent to over Tk 7.028 trillion during the period under review from over Tk 7.104 trillion as of December 31 last, the BB data showed.
The deposits decreased, as a portion of the fund had been diverted from the banking system to the national savings instruments (NSD) apart of the change in depositors' behaviour in holding cash due to the prevailing political uncertainty.
"Cash withdrawal trend of households increased recently due to the blockade and shutdowns across the country," another BB official explained.
He also said higher interest rates on savings instruments were encouraging the small savers to invest more in risk-free instruments.
Currently, the average interest rate on deposits, offered by the commercial banks, is below 8.0 per cent while the rate for savings instruments is, on an average, 13 per cent, according to the market operators.
The net sale of national savings certificates increased by more than 215 per cent to Tk 157.09 billion during the first seven months to January of the current fiscal year (FY) 2014-15 from Tk 49.83 billion in the same period of the previous fiscal, according to official figures.
The government in the current budget set a net borrowing target of Tk 90.56 billion from national savings schemes to partly finance its budget deficit
However, both excess liquidity and deposits registered a rising trend in the beginning of this month while the overall credit increased showing a downtrend, according to the BB official.
The overall credit excluding the inter-bank market fell by 0.98 per cent to over Tk 5.235 trillion on January 29 last from over Tk 5.287 trillion as of December 31 last due to the ongoing political turmoil.
"The demand for fresh credit has declined because most of businessmen have adopted a 'go-slow' policy to avoid financial risks," a senior official of a leading private commercial bank explained. [email protected]
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