The inter-bank call money rate is unlikely to rise ahead of the Eid-ul-Fitr as most of the banks are burdened with excess liquidity following suspension of treasury bonds auction in last two months.
"Considering the current liquidity situation in the market it is unlikely that the call money rate would increase from the existing level ahead of the Eid festival," a senior treasury official of a leading commercial bank told the FE.
Currently, more than 20 banks now hold more than Tk 220 billion as excess liquidity that are withdrawn by the central bank using its reverse REPO (repurchase agreement) auction tool, the treasury official explained.
"A good number of banks are now bearing excess liquidity burden because suspension of treasury bonds auctions in May and June," the banker noted.
He also said the government should take necessary measures to increase the demand for credit through ensuring enabling environment particularly for private sector investment.
The overall excess liquidity with the commercial banks stood at around Tk 1.05 trillion as of May 21 last but major portion of the funds has been invested in the risk-free government securities, according to a central bank official.
He also said excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 30 billion.
"The government borrowing always play an important role for managing the money market properly," the central banker said without elaborating.
On the other hand, the central bank decreased withdrawal of excess fund from the market through reverse REPO auction Monday to keep the call money rate stable.
The Bangladesh Bank (BB) withdrew Tk 221.96 billion at 5.25 per cent rate from the market through reverse REPO auction Monday. It was Tk 236.06 billion Sunday.
"We're mopping up excess fund from the market considering ensuring stability in the money market," a senior BB official told the FE.
He also said the central bank is ready to use its monetary instruments to check any volatility in the market ahead of the Eid festival.
The call money rate started falling soon after the postponement of the treasury bonds auction on May 5 last, according to the market operators.
The call money rate came down to 6.25-8.00 per cent on May 5 last from 6.50-8.00 per cent of the previous working day, they added.
Earlier on May 4 last, the government suspended the auction of treasury bonds for the months of May and June last to manage its cash management properly.
The call rate ranged between 5.25 per cent and 6.50 per cent Monday unchanged from the previous level. However, most of the deals were settled at rates varying between 5.50 per cent and 6.0 per cent, they added.
Such short-term borrowings normally increase before the Eid festival to meet the growing demand for cash from the bank clients.
siddique.islam@gmail.com
Call money rate to remain normal
Siddique Islam | Published: July 07, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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