Home Bangladesh Demand for cash in banks increasing
Bangladesh - Bank & Finance - December 20, 2023

Demand for cash in banks increasing

Call money market also over heated

Staff Correspondent: Due to the liquidity crunch, the tendency of commercial banks and financial institutions to borrow has increased. Borrowing more recently than before. Among them, the largest amount is borrowed from the central bank.
Apart from this, commercial banks are also borrowing from themselves. Demand for cash in banks has increased the interest rate on loans. During this phase, the interest rate of call money or borrowing for one day has increased to a maximum of 9 and a half percent. Interest rates on short-term loans rose to a maximum of 11 percent and term loans to a maximum of 12 percent. Earlier the interest rates in these sectors were even lower.
On Tuesday, the banks borrowed in call money at a maximum interest of 9.5 percent. The lowest rate was a quarter of 8 percent. The average interest rate is 9.10 percent. Total borrowed Tk 3,400 crore. Earlier the interest rate of call money was limited to 9 percent. Sometimes it rises to 100 percent.
Very few have risen to 9 and a half percent.
The interest rate for short-term loans was earlier capped at 10 percent. Now it has increased to a maximum of 11 percent. The overall rate was 10 percent. On Tuesday, short-term borrowings amounted to Tk 225 crore.
Interest rates on term loans were earlier capped at 10.5 percent. Now it has increased to a maximum of 12 percent. On Tuesday, banks have borrowed 302 crore rupees in this instrument.
Meanwhile, the commercial banks and financial institutions borrowed a maximum of 17 thousand crores from the central bank on Monday and 18.5 thousand crores on the same instrument on Sunday.
According to sources, banks are buying dollars with cash from the central bank to meet the crisis. In this, the cash of the banks is getting stuck in the central bank. Apart from this, the central bank is selling treasury bills to commercial banks to provide loans to the government. In this, the money of the banks is going to the government. The central bank is now repurchasing those treasury bills and providing money under repo.
Deposits in banks have started increasing. But now loans are increasing more than deposits. In this, the liquidity of the banks has been strained.
Meanwhile, central bank sources said that Bangladesh Bank is following a contractionary monetary policy to rein in rising inflation. Interest rate is increasing. Due to this, the interest rate of various borrowing instruments including Kolmani is also increasing.

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