Call money rate jumps to 5.85% due to liquidity crisis
Apart from growing liquidity crisis apart, the two consecutive rises in repurchase agreement (repo) rate also contributed to the big jump in the call money rate
Due to the growing demand for cash on Thursday – the last working day before Eid-ul-Azha, the interbank call money rate rose to 5.85%, which was the highest in the last six and half years.
Previously, the highest call money rate – 5.48% – since 2016 was recorded on Wednesday, when interbank transactions in the call money market was Tk8,687 crore.
Between 13 and 20 June this year, the weighted average rate in the call money market, where banks borrow from each other on an overnight basis, hovered between 5.01% and 5.03%, according to an analysis of central bank data.
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Industry insiders said growing liquidity crisis apart, the two consecutive rises in repurchase agreement (repo) rate also contributed to a big jump in the call money rate.
On 30 June, the central bank raised its key interest rate by 50 basis points to 5.50% – a record hike in recent history – as part of its efforts to keep inflation in check. A month ago on 29 May, it increased the rate to 5% from 4.75%.
The cash shortage has now exacerbated as banks continue to purchase dollars from the central bank amid a lower deposit growth.
The banks purchased $7.62 billion from the central bank in exchange for more than Tk30,000 crore in FY22.
Meanwhile, the government borrowing from the banks in the last fiscal was more than double compared to the previous fiscal.
In FY21, the government borrowing from the banking sector was Tk26,078 crore, which was Tk64,755 crore in FY22 – Tk38,677 crore more than the previous year, according to the provisional data of the central bank.
Banks purchased $7.62 billion from the central bank in the just-concluded FY22, according to the monetary policy statement.
