Dhaka, Bangladesh (BBN) – The inter-bank call money rate hit 13 percent on Monday as the central bank has squeezed the timeframe for assured liquidity support (ALS) and purchased US dollar with Bangladesh Bank (BB) bills instead of cash money.
The call rate ranged between 6.75 percent and 13 percent on the day against 6.50 percent-12.50 percent the previous day. However, most of the deals were settled between 10.00 per cent and 12.00 per cent.
Some cash-hungry banks borrowed funds through inter-bank repo deals offering maximum 15 percent interest rate on the day against 12.50 percent earlier to meet the higher demand for cash, according to the treasury officials.
The inter-bank repo system, a repurchase agreement between the borrowing and the lending banks, provides liquidity against government securities to respective commercial banks.
Besides, a good number of banks were under pressure on the day due to the deadline set to comply with cash reserve requirement (CRR) of the central bank. This pushed up the call money rate slightly, the treasury officials added.
Under the exiting rules, the commercial banks need to maintain 6.0 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis.
The banks are allowed to maintain the CRR at 5.50 per cent on daily basis, but the bi-weekly average has to be 6.0 per cent at the end, according to the rules.
“The call money rate was 7.50 percent in the second week of December last before squeezing the timeframe of ALS by the BB,” a senior treasury official of a leading private commercial bank said, adding that the existing level of call money rate may continue by the end of this month.
Earlier on December 13 last, the central bank squeezed the timeframe of assured ALS for both primary dealers (PDs) and non-PD banks by 15 days to 60 days from 75 days earlier to mop up excess funds from the market.
He also said the call money rate has increased gradually following the BB’s latest moves to mop up excess fund from the market using different monetary instruments recently.
The central bank has bought a substantial amount of the US dollars from the banks directly by using 30-day BB bills instead of cash money, he said, adding that this also contributed to the rise in call money rate.
“The central bank has used different monetary instruments including repurchase agreement (repo) auction to keep the money market stable,” a BB senior said.
He also said the central bank is providing liquidity support to the banks through special auction of repo and ALS to the PDs and non-PD banks to ease the pressure on the market.
As part of the operations, the BB injected fresh funds of BDT 95.00 billion on the day through assured liquidity support to the PD and non-PD banks.
On Sunday, the central bank injected BDT 94.92 billion funds using the same mechanisms.
BBN/SSR/AD-15Jan13-8:08 am (BST)