Dhaka, Bangladesh (BBN)– The central bank of Bangladesh on Sunday ruled out the impact of increased cash reserve requirement (CRR) on the money market, saying that it has injected more funds through repurchase agreement (Repo) auction than withdrawal.

“The central bank has injected more funds than withdrawal to keep the country’s money market stable,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka.

The commercial banks have deposited BDT 20.76 billion to the central bank to maintain the new CRR rules, which came into effect from December 15 last, a BB announcement said.
The central bank provided liquidity support amounting to over BDT 60 billion to the banks through Repo auction and liquidity support, the announcement added.

“We’ve increased liquidity support worth nearly BDT 10 billion to the banks Sunday in line with the market requirement,” the BB official said, adding the central bank is monitoring both money market and foreign exchange market closely.

The BB raised liquidity support by around BDT 7.77 billion to Tk 69.1793 billion Sunday from Tk 61.4102 billion of the previous working day, according to auction results.

On Sunday, the central bank provided Tk 26.8321 billion through Repo auction to the commercial banks while the primary dealers (PDs) received Tk 42.3472 billion as special liquidity support.

The central bank of Bangladesh earlier selected 15 PDs — 12 banks and three non-banking financial institutions (NBFIs) — to handle government securities in the secondary market.

The inter-bank call money rate — the interest rate at which banks lend to each other for short period — remained unchanged on the day despite increased liquidity support by the central bank.

The call rate was 15 per cent on the day from the range of 12 percent to 15 percent the previous day, market operators said, adding that tight liquidity persisted in the market.

On the other hand, the central bank has resumed offer of overdraft (OD) facilities to banks aiming to keep foreign exchange market stable.

Under the move, the BB provided OD facilities worth US$200 million to the commercial banks in the last two weeks for settlement of their import payments.

“We’ve provided such liquidity support to the commercial banks to help them settle import payment for petroleum products, food grains, raw cotton, fertilizer and equipment for power plants,” another BB official said.

He added that such facility would continue in line with the market requirement.

BBN/SSR/SI-09Jan11-11:55 pm (BST)