Excess liquidity falls as BB finds money market active
Sunday, 3 January 2010
Sheikh Shahariar Zaman
Surplus liquidity in the banking network has dropped in the second quarter of the current fiscal due to increased treasury bills transactions and lending to the private sector.
"Call money rate went up in the recent times and the money market has become active," said a Bangladesh Bank (BB) official.
The weighted average call rate was below 1.0 per cent in June, but it shot up to 4.9 per cent in December.
Excess reserve with Bangladesh Bank has also decreased by Tk 70 billion in six months, indicating an active money market, the BB official said.
The reserve was as high as Tk 98 billion on July 1. It came down to Tk 95 billion on October 1, and on November 1 it was Tk 72 billion. On December 1 it stood at Tk 35 billion and on December 30, the figure was Tk 30 billion, according to a central bank data.
The excess reserve is hard cash deposited by banks in addition to cash reserve requirements, and it lies idle with the central bank and bears no return.
"The idle money stands at Tk 15 billion to Tk 20 billion level, while the economy performs normally," he said.
The country has experienced a sluggish economy due to the global recession since in the first quarter the export value declined by 10 per cent. But there is a sign of recovery in the economy, the official said.
Opening of Letter of Credit (LC) is also on the rise as investors feel there is a turnaround in the global economy, he added.
"Surplus liquidity has dropped significantly, and money is not that easily available as it used to be," Anis A Khan, managing director of Mutual Trust Bank (MTB) told the FE.
Treasury bill transactions have gone up after the central bank gave licence to four new primary dealers (PD), he said.
MTB, Premier Bank, LankaBangla and IPDC got the PD licence to operate in the primary treasury bond market.
"MTB alone invested about Tk 1.7 billion in buying treasury instruments after it received the licence in December," he said.
The other primary dealers have also invested a substantial amount in the operations, he added.
Credit has also grown up in the recent times as the impact of global recession is fading out, Mr Anis said.
"Some amount of the money in the banking system is being spent to buy treasury bonds and some have gone to lending," he said adding, "My bank alone has lent about Tk 3 billion in recent times."
Import of industrial raw materials and capital machinery went up in the last quarter, the MTB managing director said.
"Import of capital machinery for infrastructure projects including power plants has gone up," he said.
In the last two years, private sector entrepreneurs struck syndication deals with banks to set up four to five power plants in the country.
Surplus liquidity in the banking network has dropped in the second quarter of the current fiscal due to increased treasury bills transactions and lending to the private sector.
"Call money rate went up in the recent times and the money market has become active," said a Bangladesh Bank (BB) official.
The weighted average call rate was below 1.0 per cent in June, but it shot up to 4.9 per cent in December.
Excess reserve with Bangladesh Bank has also decreased by Tk 70 billion in six months, indicating an active money market, the BB official said.
The reserve was as high as Tk 98 billion on July 1. It came down to Tk 95 billion on October 1, and on November 1 it was Tk 72 billion. On December 1 it stood at Tk 35 billion and on December 30, the figure was Tk 30 billion, according to a central bank data.
The excess reserve is hard cash deposited by banks in addition to cash reserve requirements, and it lies idle with the central bank and bears no return.
"The idle money stands at Tk 15 billion to Tk 20 billion level, while the economy performs normally," he said.
The country has experienced a sluggish economy due to the global recession since in the first quarter the export value declined by 10 per cent. But there is a sign of recovery in the economy, the official said.
Opening of Letter of Credit (LC) is also on the rise as investors feel there is a turnaround in the global economy, he added.
"Surplus liquidity has dropped significantly, and money is not that easily available as it used to be," Anis A Khan, managing director of Mutual Trust Bank (MTB) told the FE.
Treasury bill transactions have gone up after the central bank gave licence to four new primary dealers (PD), he said.
MTB, Premier Bank, LankaBangla and IPDC got the PD licence to operate in the primary treasury bond market.
"MTB alone invested about Tk 1.7 billion in buying treasury instruments after it received the licence in December," he said.
The other primary dealers have also invested a substantial amount in the operations, he added.
Credit has also grown up in the recent times as the impact of global recession is fading out, Mr Anis said.
"Some amount of the money in the banking system is being spent to buy treasury bonds and some have gone to lending," he said adding, "My bank alone has lent about Tk 3 billion in recent times."
Import of industrial raw materials and capital machinery went up in the last quarter, the MTB managing director said.
"Import of capital machinery for infrastructure projects including power plants has gone up," he said.
In the last two years, private sector entrepreneurs struck syndication deals with banks to set up four to five power plants in the country.