BB continues injecting money into banking sector, NBFIs
The inter-bank call money rate was reduced further to around 40 per cent on Tuesday in response to the Bangladesh Bank’s directive not to charge interest rate over 50 per cent for short-term loans.
Banking sector sources said that the call money rate, the rate of interest that banks charge other banks for overnight loans, came down from 55 per cent on Monday and hovered between 35 and 40 per cent on Tuesday.
They said that money market became relatively stable after a week of volatility as the BB warned banks on Monday not to charge interest over 50 per cent for overnight loans.
Besides, the BB’s continuous injection of money into the banking sector through Repo also helped to reduce the call money market.
The BB lent 24 banks and non-banking financial institutions around Tk 3,925 crore on Tuesday through Repo, and gave bank liquidity support of Tk 3,528 crore to 14 primary dealers.
‘The central bank has been giving Repo everyday for the last few days to calm the money market. Usually it gives Repo once or twice a week,’ said an official of the BB.
The volatility of the money market began last week with the call money rate shooting up to 175 per cent on Wednesday as the banks and non-banking financial institutes scampered to accumulate cash for increasing the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).
In line with a directive of the BB, the banks and the NBFIs on that day increased their SLR to 19 per cent from 18.5 per cent and the CRR to 6 per cent from 5.5 per cent.
The rate further rose to 190 per cent on Monday after the banks increased the CRR.
The BB on Monday released a total of Tk 4,127 crore, nearly Tk 1,000 crore more than the Tk 3,279 crore released on Sunday, through Repo to 23 banks and NBFIs.
Besides, it warned the chief executives of various banks and NBFIs not to take loans or give loans at interest rate of more than 50 per cent.
BB officials blamed commercial banks for the current liquidity shortage as many of them overexposed their funds to various sectors, including the capital market.
The shortage of cash in the banking sector also hurt the stock market as daily turnover at the bourses declined by 50 per cent in last few days.