Dhaka, Bangladesh (BBN)- The inter-bank call money rate is unlikely to rise today (Thursday), the last working before the Eid-ul-Fitr vacation as most of banks are awash with excess liquidity following suspension of treasury bonds auction in last two months.
“Considering the current liquidity situation in the market is unlikely that the call money rate would increase from the existing level today,” a senior treasury official of a leading commercial bank told BBN.
Currently, nearly 20 banks now hold more than BDT 125 billion as excess liquidity that are withdrawn by the central bank using its reverse REPO (repurchase agreement) auction tool, the treasury official explained.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 bank is now facing excess liquidity burden because suspension of treasury bonds auctions in May and June,” the banker noted.
The overall excess liquidity with the commercial banks stood at around BDT 1.05 trillion as of May 21last 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 BDT 30 billion.
On the other hand, the central bank is decreasing withdrawal of excess fund from the market through reserve REPO auction to keep the call money rate stable of the Eid.
The Bangladesh Bank (BB) withdrew BDT 125.45 billion at 5.25 per cent from the market through reserve REPO auction Tuesday. It was BDT 147.11 billion Monday.
Talking to BBN, another BB official said the central bank is mopping up excess fund from the market considering ensuring stability in the money market. “We’re 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 Tuesday 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.
BBN/SSR/AD