Dhaka, Bangladesh (BBN)- The call money rate moved further on Sunday despite raising liquidity support slightly by the central bank, treasury officials said.
The inter-bank call rate ranged between 55 percent and 180 percent on the day against 50-175 per cent of the previous working day. However, most of the deals were settled at rates ranging from 100 per cent to 150 per cent, they added.
The central bank increased liquidity support by over BDT 11 billion through repurchase agreement (Repo) auction to the commercial banks on the day to bring back stability in the country's money market.
On Sunday, the central bank received 23 bids of one-day tenor amounting to BDT 124.5512 billion. But it provided BDT 32.7479 billion against the bids.
"We've increased liquidity support to the commercial banks in line with the market requirement," a senior official of the Bangladesh Bank (BB) said, adding that the central bank is monitoring the overall money market closely.
The BB provided BDT 21.5581 billion as liquidity support through Repo auction to the banks against BDT 92.0724 billion on Wednesday last.
The call money rate sky rocketed to 175 percent on December 15 last, the first day of the enforcement of the new cash reserve requirement (CRR) rules for the commercial banks.
"The upward trend of call money may continue if the central bank does not provide sufficient liquidity support to the commercial banks," a senior treasury official of a leading private commercial bank said.
He also said the call money recorded an abnormal trend in the recent days following a reduced level of liquidity support from the BB through Repo auction.
The central bank started slashing liquidity support to the commercial banks since November 28 this year that continues until Sunday to implement its ongoing tight monetary policy, the central bank officials said.
The BB has taken the latest move against the backdrop of rising trend in inflation as well as broad money supply in the market, they added.
BBN/SI/AD-20Dec10-10:20 am (BST)