Dhaka, Bangladesh (BBN) – The call money rate came down to 50 percent on Monday from the previous day’s highest-ever 190 per cent, following the central bank’s intervention in the market, officials said.

“We’ve intervened in the market to bring back stability in the inter-bank call money rate,” a senior official of the Bangladesh Bank (BB) said, adding that the central bank may intervene further to ease call money rate.

The call rate ranged between 9.0 percent and 50 per cent on the day against 55-190 per cent of the previous working day. However, most of the deals were settled at rates ranging from 45 per cent to 50 per cent, treasury officials said.

The treasury officials welcomed the BB’s latest move, saying that the call money rate does not ease without intervention in the market by the central bank or providing sufficient liquidity support to the banks through Repo auction.

As part of the intervention, the central bank asked some commercial banks to quote call money rate at not more than 50 percent for both lending and borrowing on the day.

The BB’s latest move came after the call money rate recorded an abnormal trend in the recent days following a reduced level of liquidity support from the central bank through repurchase agreement (Repo) auction.

The central bank started slashing liquidity support to the commercial banks since November 28 this year that continued until Monday for implementing its ongoing monetary policy, the BB officials said.

They also said the commercial banks have been directed to ensure proper use of the liquidity, which was provided by the central bank through Repo auction.

“We’ve asked the banks not to misuse such liquidity support,” the BB official said, adding that the central bank is monitoring the overall money market closely.

The call money rate sky rocketed to 175 per cent on December 15 last, the first day of the enforcement of the new cash reserve requirement (CRR) rules for the commercial banks.

The BB has ruled out the impact of increased CRR in the money market, saying that it has injected more funds through Repo auction than withdrawal in this connection to keep the country’s money market stable.

The central bank raised CRR by fifty basis points to 6.0 per cent for the commercial banks on December 1 last to help curb inflationary pressure on the economy.

“The commercial banks have deposited BDT 20.76 billion to the central bank to maintain the new CRR rules,” BB Governor Atiur Rahman told reporters, adding that the central bank provided liquidity support amounting to around Tk 70.00 billion to the banks through Repo auction.

He also said the call money rate has started coming down that would ease further shortly.

The central bank increased liquidity support by over BDT 8.52 billion through Repo auction on Monday from the previous working day to raise fresh fund flow in the market.

On Monday, the central bank received 22 bids of one-day tenor amounting to BDT 120.2580 billion. But it provided BDT 41.2744 billion against the bids, according to the auction result.

The BB provided BDT 32.7479 billion as liquidity support through Repo auction to the banks against Tk 124.5512 billion on Sunday.

BBN/SI/AD-21Dec10-10:04 am (BST)