Call money rate before Eid holidays belies bankers’ liquidity crisis claim

Staff Correspondent | Published: 00:05, Jun 15,2018

 
 

Clients wait in a long queue for conducting banking activities at a branch of a private bank at Motijheel in Dhaka on Thursday, the last day before the start of Eid-ul-Fitr holidays. The call money rate remained within 3.75 per cent before the Eid-ul-Fitr vacations, the peak time for money transaction by clients to meet the expenditure for one of the biggest religious festivals of the Muslims. — Ali Hussain Mintu

The call money rate remained within 3.75 per cent before the Eid-ul-Fitr holidays, the peak time for money transaction by clients to meet the expenditure for one of the biggest religious festivals of the Muslims.
Eid-ul-Fitr holidays begin today as the festival will be celebrrated on June 16 or 17 subject to the appearance of the moon.
Despite the bankers’ claim of liquidity crisis in the banking sector, the situation of the money market, however, tells a different story considering the liquidity situation in last year.
In 2017, the call money rate in the money market increased above 4 per cent before few days of Eid vacations despite the fact that the banks’ liquidity situation, as per the claim of the banks, was comparatively better then.
The call money rate is the rate at which short-term funds are borrowed and lent by banks in the money market.
As per the Bangladesh Bank data, the call money rate increased to 3.73 per cent on Tuesday (June 12) from 3.01 per cent on May 30 this year.
According to Bangladesh Bank officials, the demand for money of the banks usually increases before the Eid vacations due to withdrawal of fund by the depositors to meet Eid expenses.
As the interest rate remained below 3.75 per cent before a day of Eid vacations start, it indicates that the banks were in comfortable situation compared with last year in terms of liquidity, the officals said.
The weighted average call money rate was between 2.6 per cent and 3.19 per cent during April and May this year after remaining around 4.6 per cent in March this year.
Asked, BRAC Bank managing director Selim RF Hussain told New Age that the call money market was a short-term maket and there were TAR market and cutomer deposit market as well.
‘Only the call money market does not show you the true picture of banks’ liquidity situation as banks are still taking customers fund at 10-11 per cent interest,’ he said.
The call money market fund can not allow a bank to run its lending activities for long term, he added.
Following the bank owners’ claim of liquidity crisis in January this year, the government met the bank owners’ demand for depositing 50 per cent of funds instead of 25 per cent by the state-owned agencies in the private banks.
The bank owners also realised their demand for lowering the bank rate to 6 per cent from 6.75 per cent and cash reserve requirement to 5.5 per cent from 6.5 per cent on the pretext of liquidity crisis.
The central bank at the same time extended the advance deposit ratio adjustment deadline for the banks to March 31, 2019 from December 31, 2018. 

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