The Bangladesh Bank's growing fund injection to the market through various instruments is helping to control the interbank call money rate ahead of the Eid-ul-Fitr, when the rate normally goes up following surging liquidity demand.
The instruments are repo, liquidity support facility, Islamic banks liquidity facility (IBLF), and Mudaraba liquidity facility (MLS).
As a result, the interbank call money rate on a short-term or overnight loan continued to decline to 6.01% on April 6, from a record high of 7% on January 25.
Call money rate is the weighted average interest rate on a short-term or overnight loan from one bank to another to meet an urgent requirement.
The call money rate started rising sharply from March 21, 2022, when it was at 2.05%.
Following the Russia-Ukraine war, volatility in the forex market, and mass fund withdrawal from the banks riding on rumours of liquidity shortfall, the demand for short-term interbank loans kept rising.
As a result, the call money rate hit a record high of 7% on January 25 earlier this year.
The banks usually choose the emergency loans to fill asset-liability mismatch, comply with the statutory CRR and SLR requirements, and meet any sudden demand for funds.
According to the central bank, six banks and one financial institution submitted 28 bids amounting to Tk2,417 crore as 7-day tenor facility in the auction on March 28.
Five banks submitted 16 bids worth Tk2,051 crore as one-day liquidity support facility, while five banks submitted five bids amounting to Tk3,215 crore as 14-day IBLF.
All bids were accepted by the BB's auction committee.
Accordingly, a total of Tk7,683 crore was provided under repo, liquidity support facility, and IBLF.
The amount of excess liquidity in the banking sector dropped by Tk57,707 crore to Tk146,000 crore at the end of December 2022 -- from that of Tk203,000 crore in June 2022.
