Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has withdrawn funds from the banking system using its monetary tool further to mop up excess liquidity from the market, officials said on Monday.
As part of the move, the Bangladesh Bank (BB), the country's central bank, withdrew BDT 8.30 billion from the banking system on Monday using the 30-Day Bangladesh Bank Bills.
The central bank of Bangladesh accepted 19 bids worth BDT 8.30 billion in the fourth auctions of the short-term monetary tool held at the central bank in Dhaka on the day.
"The rate of weighted average yield, generally known as interest rate, of the accepted bids was 0.97 per cent per annum," the central bank said in an auction result.
The BB withdrew BDT 28.77 billion in the last 22 days using the tool, which has left no impact on the money market, treasury officials said.
"It is a temporary measure. When the market will move forward, the measure may be suspended," a senior BB official said, adding that the central bank reintroduced the auction of 30-day Bangladesh Bank Bills on August 10 aiming to mop up the excess liquidity from the market.
The overall excess liquidity with the commercial banks stood at BDT 347 billion in June this year, accounting for 165 percent growth over the corresponding period of the previous fiscal, the BB's data showed.
Treasury officials however said the BB's intervention is yet to make any positive impact on the country's money market because of the lower interest rate of the bills.
They also said the market will move only after resumption of the reverse repurchase agreement (repo) auction, which was suspended nearly five months back.
The demand for funds in the inter-bank call money market is now so poor that most of the deals on Monday were concluded at rates between 0.20 per cent and 0.25 per cent, market operators said.
Non-acceptance of reverse repo by the central bank since March 25 last also contributed to the decline in call rate sharply, the treasury official added.
BBN/SS/SI/AD-01SEptember09-1:17 am (BST)