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The inter-bank call money rate remained almost stable on Tuesday, as banks are flooded with excess liquidity amid poor credit demand from businesses - mainly due to the ongoing Covid-19 pandemic, bankers said.
The weighted average rate (WAR) on call money rose to 1.83 per cent on the day from 1.79 per cent of the previous working day. It was 2.08 per cent a week ago, according to the central bank's statistics.
Such a short-term borrowing normally increases before festivals, as demand for cash grows.
The volume of transactions in the inter-bank call money market came down to Tk 43.15 billion on Tuesday from Tk 45.76 billion of the previous working day. It was Tk 33.95 billion on May 04, the official figures showed.
The call money rates ranged between 1.00 per cent and 5.25 per cent on Tuesday, remaining unchanged from the previous level.
"We expect that the inter-bank call money rate will remain stable on Wednesday, the last working day before the Eid-ul-Fitr festival," a senior official of the Bangladesh Bank (BB) told the FE.
Most of the deals were settled at rates varying between 1.00 per cent and 5.00 per cent, according to the market operators.
Actually, the deals were settled at rates ranging between 1.00 per cent and 2.00 per cent among the banks, while non-banking financial institutions borrowed money at interest rates varying between 1.25 per cent and 5.25 per cent from the banks, they explained.
They also said the demand for cash money has decreased following increased use of debit and credit cards as well as other alternative delivery channels (ADCs) in the recent months.
Talking to the FE, a senior executive of a leading private commercial bank (PCB) said a section of people prefer to withdraw cash money from the banks using debit and credit cards to avert health hazards.
"Most of the people now prefer transactions through ADCs on the same ground," the PCB official explained.
The ADCs cover the operations of ATM (Automated Teller Machine), POS (Point of Sale), e-Payment Gateway and Mobile Financial Services (MFS).
Transactions using the digital channels, such as ATM, internet or online and mobile, normally increase significantly during the weekend and other holidays.
Meanwhile, excess liquidity with all the scheduled banks more than doubled in March 2021, following significantly lower private credit growth mainly due to the ongoing pandemic.
The surplus liquidity grew by over 120 per cent to Tk 1,984 billion as on March 30 from Tk 899.09 billion a year before. It was Tk 2,047.18 billion as on December 31, 2020, according to the central bank's statistics.
The private sector credit growth came down to 8.79 per cent in March 2021 on a year-on-year basis from 8.93 per cent a month ago because of the pandemic second wave.
The growth was 6.01 percentage points lower than the central bank's target of 14.80 per cent for the second half (H2) of this fiscal year (FY), 2020-21.