Call money market reels from depleting liquidity

Business Desk :
Cash rates shot up last week in the interbank money market, or call money market, as the dollar became more expensive amid the global economic slowdown.
Sources said that bank-to-bank lending rates marked a steep rise by 31% since last June and over 148% since a year before in 2021.
Bankers say they faced difficulty in meeting urgent needs of cash in recent weeks as liquidity in the banking system was inadequate to meet the banks’ funding needs.
At the end of Thursday, the one-day interbank money rate was 5.78% (weighted average), up by nearly 5% in a month.
The bankers argue that this dearth is for a lack of adequate liquidity on the market.
For this reason, banks borrow from other banks to meet their needs.
Call-money rate is the interest rate on overnight or short-term loans from one bank to another to meet urgent needs-and this is annualized rate.
Liquidity surplus also comes down if the central bank raises banks’ cash-reserve requirements.
On September 30, Bangladesh Bank raised the repo rate, known as repurchase agreement in banking parlance, by 25 basis points for a second time in three months to put a brake on the expansionary monetary regime and hence contain inflation.
But, bankers argue, this is not the main reason. The central bank has tightened its belt by deploying a repo rate to deal with rising inflation, which hit nearly a double-digit zenith in September last.
The long-term treasury bonds’ yield now has inched up to nearly 9.0% and can be traded both on stock-exchange platforms and Bangladesh Bank’s MI module.