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Call money rate on the rise ahead of Eid

Staff Correspondent
25 Apr 2022 21:18:00 | Update: 25 Apr 2022 21:28:52
Call money rate on the rise ahead of Eid
The weighted average call money rate stood at 4.76 per cent on Monday — UNB File Photo

The inter-bank call money rates are on the rising trend despite injecting funds by the Bangladesh Bank into the money market ahead of Eid-ul-Fitr, the biggest religious festival of Muslims.

The weighted average call money rate stood at 4.76 per cent on Monday, up from 2.54 per cent in a month ago, as per the latest data from the central bank. However, the call money rate reached 4.77 per cent on Sunday.

Officials of the commercial banks said that people are withdrawing more money from banks ahead of Eid than previous time, which creates pressure in the money market.

The call money rate is the interest rate on a type of short-term (overnight) loan from a bank to another to meet emergency needs.

The call money rate reached 4 per cent on March 31 after hovering between 2 and 3 per cent for several months.

Pressure on the foreign exchange market, surging import payments, and picking up business activities ahead of the Eid were the main reasons behind the soaring inter-bank call money rate, according to bankers.

“Banks were sitting on cash during the pandemic, but now have been facing a shortage of cash, sending the call money rate to a new high,” said a top official at the treasury department of a state-run bank.

The surplus liquidity of the bank has decreased due to purchasing the US dollar from the central bank.

“Now, there is a huge pressure on the foreign exchange market due to a steep rise in the import payment,” said Dhaka Bank Managing Director and Chief Executive Officer Emranul Huq.

“And the import payment got the pace due to fuel price hike in the global market,” he added.

The import payment rose sharply by 52.01 per cent to $52.60 billion during the July-February period of the current fiscal year.

As of April 25, the inter-bank exchange rate stood at Tk 86.20 per dollar, up from Tk 85.15 per dollar in August last year.

The exchange rate of the US dollar has started rising since July last year due mainly to the rising import payment when the exchange rate of the greenback was Tk 84.80.

“Economic activities also increased ahead of the Eid, putting pressure on the liquidity,” the Dhaka Bank CEO said.

“The call money rate will come down after the festival,” he added.

Meanwhile, the central bank withdrew money from the banking system by selling $4.50 billion as of April 24, according to the BB data.

At the end of February this year, excess liquidity in banks stood at Tk 2,04,600 crore, down from Tk 2,11,506 crore a month ago, as per the latest data from the central bank.

The surplus fund will further come down in the upcoming months, said a BB official.

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