Higher cash withdrawal for Eid raises call money rate

The inter-bank call money rate increased slightly on Thursday mainly due to higher withdrawal of cash from the banks ahead of the Eid-ul-Fitr.

The call rate ranged between 4.75 percent and 5.25 percent on the day against the previous range between 3.50 percent and 5.25 percent while it was 3.00-5.25 percent on April 21.

However, most of the deals were settled at rates were varying between 4.75 percent and 5.00 percent, according to market operators.

Meanwhile, the weighted average rate (WAR) on call money rose to 4.98 percent on Thursday from 4.75 percent of the previous working day. It was 4.75 percent a week ago.

On the other hand, total turnover in the market drastically fell on the day as some lenders preferred to invest their funds in other forms like short-term deposit as well as short notice deposit to other cash-hungry banks instead of call money lending.

The banks were reluctant to lend their excess funds to other banks through the call money market due to lower interest rates, they explained.

The total volume of transactions in the market came down to Tk4.31 billion on Thursday from Tk88.81 billion of the previous working day, according to the central bank's latest statistics. It was Tk63.85 billion a week before.

The call money rate maintained an upward trend in recent days despite injecting fresh funds by the central bank into the market to keep the money market stable before the Eid.

"We've injected fresh funds into the market continuously aiming to keep the money market stable before the Eid festival," a top central bank official said.

As part of the move, Bangladesh Bank (BB) injected fresh funds amounting to Tk49.46 billion into the market in the forms of assured liquidity support (ALS) as well as repurchase agreement (repo) on Thursday to both primary dealer (PD) banks and non-PD banks.

"The call money rate increased slightly on Thursday before the Eid vacation because of higher withdrawal of cash from the banks," a treasure head at a leading private commercial bank (PCB) said while explaining the latest market situation.

The BB's continuous liquidity support helped keep the market almost stable before the Eid vacation, the private bank official added.

Such short-term borrowing normally gets accelerated before the festivals as then the demand for cash grows.