Tk 1.30t liquidity glut in banks cools market

An all-time-high Tk 1.30-trillion liquidity glut in banks cast a damper on usual pre-festival upswing of call money in inter-bank borrowings, officials said.
The inter-bank call-money rate remained stable Monday, barely a week before the Eid-ul-Azha fiesta that sees a binge of buying sacrificial animals and their rawhides.      
The call rate ranged between 2.75 per cent and 4.50 per cent on the day, against the previous range between 2.65 per cent and 4.50 per cent.
However, most of the deals were settled at rates varying between 3.50 per cent and 4.0 per cent, they added.
On the other hand, the total turnover on the call-money market rose to Tk 58.61 billion on the day from Tk 57.81 billion last Sunday.
"Most banks are still facing excess-liquidity burden because of lower credit demand recently following a downturn in prices of commodities, including petroleum products, on the global market," a senior treasury official of a leading private commercial bank told the FE.
The call-money rate is unlikely to rise ahead of the Eid festival despite higher withdrawal of cash from the banks, the treasury official hinted.
He also said such short-term borrowings normally increase before Eid to meet a growing demand for money from the banks.
Meanwhile, the overall excess liquidity with the commercial banks stood at around Tk 1.30 trillion as of July 14 last from Tk 1.20 trillion as on June 30, according to the officials.
"The excess liquidity increased during the period under review due to higher recovery than fresh disbursement of loans by the banks," a senior official of the Bangladesh Bank (BB) told the FE.
He also said around 95 per cent of excess liquidity has already been invested in the risk-free government securities.
"We expect that the excess liquidity may come down at the level of Tk 1.20 trillion again shortly," the central banker noted.
Besides, the government as well as the central bank has taken various measures to keep the inter-bank money market stable before the Eid, according to the BB official.
As part of the moves, the government has already dropped Treasury Bills (T-bills) and the Bangladesh Government Treasury Bonds (BGTBs) auctions ahead of the festival to keep money market stable.
The government is expected to borrow Tk 31 billion in September 2016 through both T-bill and the BGTB auctions, BB official said.
Talking to the FE, another BB official said the central bank is now using its monetary instruments, including BB bills, for keeping the money market stable ahead of the Eid.
On the other hand, the BB has already intensified purchase of the greenback from the banks as an interventional measure aimed at taming the inter-bank foreign-exchange market ahead of the festival.
As part of the move, the central bank bought US$85 million from three commercial banks Thursday directly to protect the interests of exporters and migrant workers by keeping the exchange rate of the local currency against the US dollar stable.
A total of $1.04 billion was bought from the commercial banks between July 11 and September 1 of the current fiscal year (FY) 2016-17 for offsetting the impact of its increased supply to the market.
"We may continue buying of the US dollar from the banks in line with the market requirement," the central banker hinted.
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