Home ›› 09 Jan 2023 ›› Front
The inter-bank overnight call money rate reached 6.80 per cent on Sunday, the highest in six years, as most of the banks are facing a liquidity crisis.
This call money rate is the interest rate on a type of bank-to-bank short-term (overnight) loan aimed to meet emergency needs.
The rate had crossed the 6 per cent mark and reached 6.70 per cent on January 5, as per data from Bangladesh Bank (BB), which has been keeping this data since May 2016.
Earlier, the call money rate was 4 per cent on March 31 after hovering between 2 and 3 per cent for several months.
Not just the call money market, banks are now also borrowing from BB through repurchase agreements or repo.
Industry insiders said the pressure on the foreign exchange market, surging import payments, the revival of business activities and recently surfaced loan irregularities in some Shariah-based banks are the reasons behind this trend.
Banks were sitting on cash during the Covid-19 pandemic but now they are facing a shortage of cash, sending the call money rate to a new high, said a senior treasury department official at a state-run bank.
The official said the bank’s surplus liquidity decreased after it bought the US dollar from the central bank. Surplus funds in the banking sector are also decreasing.
At the end of November 2022, surplus liquidity in banks stood at Tk 1,53,000 crore, down from Tk 1,69,586 crore a month ago, as per the latest BB data.
The excess fund in the banking sector decreased by Tk 16,586 crore in November since the month was very vulnerable as some banks, including Islami Bank Bangladesh Limited, faced huge pressure of deposit withdrawal following loan irregularity allegations.
However, Pubali Bank CEO and Managing Director Mohammad Ali told The Business Post that the surplus fund continues to fall due to the ongoing forex crisis and rising inflation.
He said that now the expenditure of depositors has increased due to inflation. As a result, they are failing to save money.
The country’s inflation stood at 8.85 per cent in November and it was 8.91 per cent in October, according to the Bangladesh Bureau of Statistics.
Ali said that the growing transport cost following the fuel price hikes has been another reason behind the falling trend of surplus funds. “Hopefully, the situation will improve when the forex market cools down.”
