Dhaka, Bangladesh (BBN)- Bangladesh’s money market maintained a stable trend on Tuesday, the last working day, before Eid-ul-Fitr festival, as the Bangladesh Bank (BB) injected BDT 164.72 billion.
The call rate ranged between 7.0 percent and 14.00 percent on the day unchanged from the previous level. However, most deals were settled at 14.00 per cent, the market operators said.
The call money rate for borrowing by the non-banking financial institutions (NBFIs) from the commercial bank remained unchanged at 16 per cent on the day.
"The central bank has used different monetary instruments including repurchase agreement (repo) auction to keep the money market stable before the Eid festival," a BB senior official told BBN.
The central bankers also said the BB has been able to provide a substantial amount of fresh fund to the banks due to lower borrowing from the banking system by the government recently.
The call money rate hit maximum at 20 percent on August 29 last year, the last working day, before the Eid festival, they added.
Total turnover in the market came down to BDT 52.07 billion on Tuesday from BDT 55.69 billion of the previous working day, the BB data showed.
Most branches of the banks, especially at Motijheel, Dilkusha and other commercial hubs of the capital, witnessed long queues of people to withdraw money before the Eid festival.
Some cash-hungry banks borrowed fund through inter-bank repo deals with offering maximum 16 percent interest rate on the day unchanged from the previous level to meet the higher demand for cash ahead of the Eid.
The inter-bank repo system, a repurchase agreement between the borrowing and lending banks, provides liquidity against government securities to respective commercial banks.
“The short-term borrowings normally increase before the Eid to meet the growing demand for cash from the banks. But this year is exception because of injection a substantial amount of fresh fund by the BB in the market,” a senior treasury official of a commercial bank said.
The central bank has been providing liquidity support to the banks through auction of repo and special liquidity support to the primary dealer (PD) and non-PDs to ease the pressure on the market during the holy month of Ramadan and Eid-ul-Fitr.
As part of the move, the BB injected fresh funds worth BDT 164.72 billion on the day through auction of repo and special liquidity support to the PD and non-PDs.
On Monday, the central bank injected funds worth BDT 156.95 billion using same mechanisms, the central banker said.
Besides, the BB has provided fresh fund through purchasing the US dollar from the commercial banks directly to keep the exchange rate of the Bangladesh Taka (BDT) against the US dollar.
As part of the operation, the central bank purchased US$12 million from three commercial banks on Tuesday aiming to keep the inter-bank foreign exchange market stable, another BB official said.
"We've injected around Tk 92.99 billion since last week of June in the market through purchasing $1.141billion from the banks," the central banker said, adding that the BB may continue such intervention in line with the market requirement.
The country’s foreign exchange (forex) reserve rose to $11.21 billion on Tuesday from $11.14 billion of the previous day, following the purchase of the US dollar for the banks.
BBN/SSR/AD-15Aug12-11:30 am (BST)
