Dhaka, Bangladesh (BBN) – The demand for Bangladesh Taka (BDT) in the country’s money market fell recently as slashing the cash reserve requirement (CRR) by the central bank of Bangladesh.

After improving supply of fresh funds, the weighted average inter-bank call money rate and weighted average yield on Bangladesh Bank (BB) Bills dropped significantly in the recent days, according to market operators.

All 57 scheduled banks of Bangladesh are enabled to use BDT 101 billion additional fund since April 15 after implementation of revised CRR rules.

Under the revised rules, the banks will have to maintain 5.50 per cent instead of 6.50 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis.

However, the weighted average inter-bank call money rate came down to 3.76 per cent on Monday from 4.53 per cent as on April 12 while volume of overall transactions also fell to BDT 46.66 billion from BDT 78.36 billion, according to the central bank’s statistics.

On the other hand, the weighted average yield (WAY) on 07-Day BB Bills fell to 1.32 per cent on Tuesday from 2.98 per cent as on April 12 while the WAY on 14-Day BB Bills dropped to 1.28 per cent from 2.98 per cent, the BB data showed.

Besides, the central bank unofficially suspended the auction of 30-Day BB Bills since April 01 to help mitigate the liquidity crunch in the banking system.

The market operators, however, said the central bank is not accepting all bids of the BB Bills in the recent days.
On Tuesday, 12 bids amounting total of BDT 36.55 billion were offered for 07-Day BB bill auction. Of which three bids amounting a total of BDT 6.55 billion were accepted.

On the other hand, 10 bids amounting total of BDT 35.95 billion were offered for 14-Day BB bill auction. Of which four bids amounting BDT 24.50 billion were accepted.

Talking to the BBN, a BB senior official said the central bank expects that the banks will invest their excess funds in the productive sectors to help achieving maximum economic growth by the end of this fiscal year.
“Our latest moves will also help bring down the interest rates on lending at single digit from the existing level,” the BB official explained. “It also creates scope for cash hungry banks to receive fund with lower interest rates from the banks having excess liquidity.”

Earlier on April 16, the BB asked the banks to take effective measures to lower the interest rate on lending to single digit from the existing level as soon as possible.

The BB’s latest move came three days after the prime minister’s advice to the banks to bring down the lending rates to single digit to boost investments in the country.

“Interest rates have to be slashed and this should be in single digit. Or else, the investment will not accelerate along with the employment generation,” said Prime Minister Sheikh Hasina while receiving donations for her Relief and Welfare Fund from the Bangladesh Association of Banks (BAB) at her official residence Ganobhaban in the capital on April 13.