Call money rate reaches new high at 6.80%

The average call money rate – the interest rate at which a bank borrows from another overnight – reached 6.80% on Sunday from the previous day's 6.70%.

The rate reached 6.70% on Thursday from the previous day's 5.77% after the central bank allowed banks to raise the rate to maximum 6.75% amid the liquidity crisis marking the highest in six and a half years, according to the Bangladesh Bank, which has been keeping data on the call money rate since May 2016. 

The overnight borrowing rate remained equal or lower than the repo rate – the interest rate at which the central bank lends to other banks.

Market insiders said banks have been failing to borrow overnight at repo rate, currently 5.75%, in recent days as the liquidity crisis has worsened, causing the increase in call money rate. 

Bangladesh Bank data says despite the increase in call money rate, the overnight bank borrowings increased to Tk3,931 crore on Sunday from Tk3,423 crore the previous day. 

Overall, three types of bank borrowings totalled TK4,594 crore on the day, while the interest rate for short notice loans were highest at 8.75% and term loans at 8.90%.

A treasury head of a private bank told TBS, wishing to remain unnamed, that banks are more interested in providing short notice and term loans rather than call money loans mainly due to a big difference in interest rates. 

"Despite the central bank's support, many banks are failing to address their liquidity crisis, which is why the inter-bank borrowing has been in an upward trend," he said and added that the new call money rate will have little significance.

The loan amount of the banks through repo in July this year was Tk13,619 crores, which rose to Tk16,206 crore in August, Tk29,650 crore in September, Tk79,641 crore in October and Tk61,803 crore in November.