Dhaka, Bangladesh (BBN)– Pressure on the money market of Bangladesh may increase further this week ahead of the calendar year closing on December 31.
Some banks have already tried to decrease their dependency on the inter-bank call money market for better balance sheet management, according to market insiders.
The volume of transaction in the call money market may fall slightly this week while fund will be moved using other windows like inter-bank repo and short notice deposit (SND).
The weighted average rate (WAR) on inter-bank repo rose to 5.69 per cent on Thursday from 4.67 per cent on Tuesday.
However, the WAR on call money rose to 4.98 per cent on Thursday from 3.92 per cent a week ago. It was 4.61 per cent on December 27, 2018.
On the other hand, the call money rate ranged between 3.00-5.50 per cent and 2.70-5.50per cent in the last week. But most of the deals were settled at rates varying between 4.00 per cent and 5.50 per cent.
Meanwhile, the overall transaction came down to BDT 26.82 billion on Thursday from BDT 71.78 billion a week ago. The existing trend may continue till December 30.
Bangladesh’s money market comprises 59 scheduled banks and 34 non-banking financial institutions (NBFIs) as intermediaries, 20 of them are primary dealers in public securities.
Inter-bank call and repo, reverse repo, Bangladesh Bill (BB) bills, Bangladesh Government Treasury Bonds (BGTBs), treasury bills (T-bills) are primary operations in the money market.
Bangladesh money market remains stable despite of higher bank borrowing by the government to finance its budget deficit partly.
But the market may face an extra burden if the ongoing higher borrowing from the banking system by the government continues in the coming months.
Meanwhile, the government’s net bank borrowing stood at BDT 426.07 billion, which was around 90 per cent of the total target, as of November 21 of FY 2019-20, according to the BB’s confidential report.
Of the total, the government borrowed BDT 380.65 billion from the scheduled banks by using T-bills and bonds, and the remaining BDT 45.42 billion from the central bank.
Besides, the central bank continuous selling of the US dollar to the commercial banks to help set their import payment obligations may push up liquidity pressure on the market in the coming months.
The Bangladesh Bank (BB), the country’s central bank, so far sold $283 million to the banks particularly public ones during the current fiscal year (FY) 2019-20 to meet the growing demand for the greenback in the market.
In that situation, the central bank should devolve major portion of the borrowed amount on its own accounts to avert liquidity pressure on the money market in near future, they added.