Central Bank of Bangladesh. File Photo
The average call money rate has surged to 9.60% - marking the highest point in the last 12 years due to recent policy rate hikes by the Bangladesh Bank.
Bangladesh Bank data shows that banks borrowed Tk3,251 crore from the call money market on Sunday (28 January). This demand pushed the weighted average rate to a staggering 9.60%, marking the highest since 2013.
Prior to this, 2012 saw an average call money rate of 12.82%.
Sector insiders cited several reasons for the interest rate hike.
On the one hand, the economic slowdown is making it harder to collect loans from borrowers and high inflation is eroding consumer confidence, causing deposits to dry up.
On the other hand, banks` funds also significantly increased due to the policy rate hikes.
However, banks are obligated to maintain the Cash Reserve Ratio (CRR) against deposits. To meet this requirement, they are forced to borrow at higher interest rates.
Banks lend overnight money to each other to fill the asset-liability mismatch or to meet sudden demand for funds. The market was introduced in the country in the early 1980s.
Messenger/Alamin
