Call money rate hits 6-year high at 5.85%

The call money rate reached 5.85 per cent on Thursday, the highest in six years, as banks’ liquidity demand rose due to increased pressure to withdraw cash ahead of Eid-ul-Azha.

The previous record was 5.17 per cent on June 20, 2020, the Bangladesh Bank data shows. The call money rate has been increasing since June this year.

Several bankers in the capital said the pre-Eid cash withdrawal pressure was higher than the previous years.

An official of One Bank’s Dhanmondi branch told The Business Post the cash withdrawal pressure is usually high ahead of Eid-ul-Azha as people buy sacrificial animals.

“Those doing leather business also withdraw a lot of money during this period. To supply cash to those withdrawing large amounts, we took help from other branches,” he said.

An official at the Shyamoli branch of the state-owned Janata Bank said the whole week had seen high cash withdrawal pressure. He said the pressure on Thursday was much higher as it was the last workday before Eid.

Abdul Awal, general manager of NRBC Bank’s Dhanmondi branch, said the pressure was very high on Thursday morning and then slightly decreased as the day progressed.

However, the pressure in the flood-hit areas was not that high. An Agrani Bank official in the Sylhet region told The Business Post this year is an exception due to the natural calamities.

According to the central bank, the short-term interbank loan amount was Tk 36,988 crore in the past five working days while the call money rate increased from 4.54 per cent on Sunday to 5.85 per cent on Thursday.

The call money rate also rose due to the central bank raising the policy rate to 5.5 per cent from 4 per cent in a short span of time. When the policy rate increases, other rates go up as well.

Besides, amid the huge import pressure, banks bought dollars from the central bank at higher rates because of the exchange rate volatility. As a result, liquidity in banks decreased.

During the financial year 2021-22, banks purchased $7.62 billion from the central bank in exchange for more than Tk 30,000 crore.

Moreover, in May this year, excess liquidity in banks declined from Tk 2,31,500 crore to Tk 1,89,200 crore.

Another major reason for banks’ liquidity crisis is the government’s bank borrowing to meet budget deficits.

In FY22, the government borrowed around Tk 65,000 crore from the banking system, which was almost double the amount in the previous fiscal year.