Pre-Eid liquidity movement in the money market is on the rise now, as a result of which the call money rate has cooled.
The call-money rate dropped to 8.46% as cash feeding into the commercial banks by the Bangladesh Bank lowered demand for interbank borrowings.
Borrowing by banks in need through interbank sources normally goes up during Ramadan and ahead of Eids because of growing demand for formal credit.
Such occasional borrowing basically pushes up the call- money rate. But things look completely different this time around, with the call-money rate staying on a downturn for the last one month.
Officials and bankers have said the liquidity injections by the country's central bank in various forms, like issuance of special bonds and currency-swap continues, have risen in recent weeks after last January's volatility in call-money rate.
The demand for interbank debts is declining as the liquidity situation of the commercial banks is getting better riding on the increased fund injections.
Sources at the Bangladesh Bank said the call money rate now stood at 8.46% on March 13.
The rate went past the upper ceiling at 9.50% of the interest-rate corridor (IRC) on January 28 to hit 9.60%.
The average interest rates charged on overnight loan by one bank to another were 9.27%, 9.20%, 9.02%, 8.81%, 8.48%, 8.55%, 8.85%, 8.53% and 8.46% on March 3, March 4, March 5, March 6, March 7, March 10, March 11, March 12 and March 13 respectively.
On the other hand, the Bangladesh Bank keeps accepting all the liquidity-related appeals of the commercial banks considering existing liquidity pressure in the banks.
As a result, the liquidity stress in the banking sector started easing.
According to central bank statistics, the commercial banks had received over Tk14,000 crore from the BB through selling their overbought US dollars under the currency-swap window until March 12.
On the other hand, the banks also received AR support worth around Tk20,000 crore against the special bonds so far.
