The inter-bank call money rate increased further on Sunday despite injecting fresh funds by the central bank into the money market to keep it stable before the upcoming Eid-ul-Fitr festival.
The call money rate rose slightly, ranging between 3.50 per cent and 5.25 per cent, on the day from 2.25-5.25 per cent a week before.
But most of the deals were settled at rates varying between 4.75 per cent and 5.00 per cent, according to market operators.However, the weighted average rate (WAR) on call money rose to 4.77 per cent on the day from 4.46 per cent a week ago, according to the central bank's latest statistics. It was 4.75 per cent on Thursday.
On the other hand, the central bank is injecting fresh funds into the market continuously using its monetary instruments to keep the market stable before the Eid-ul-Fitr festival.
As part of the move, the Bangladesh Bank (BB) injected fresh funds, amounting to Tk 32.51 billion, into the market in the forms of assured liquidity support (ALS) as well as repurchase agreement (repo) on Sunday to both primary dealer (PD) banks and non-PD banks.
Earlier, on Thursday, the central bank injected such funds worth Tk 50.21 billion using its same monetary instruments, officials said.
"We may inject fresh funds into the market until the last working day before the Eid vacation to the cash-hungry banks in line with market requirement," a top central banker told the FE.
He also said the central bank was also providing a special repo facility to banks on the same ground, if necessary.
The call money rate has maintained an upward trend in recent days due mainly to higher withdrawal of cash money from the banks ahead of the Eid-ul-Fitr festival.
"The existing trend of the call money market may continue until the last working day before the Eid vacation," said the treasury head of a leading private commercial bank while predicting the call money rate before the Eid vacation.
He also said the BB's continuous liquidity support helped keep the market stable.
Such short-term borrowing normally gets accelerated before the festivals as demand for cash grows.
Meanwhile, some banks are reluctant to lend their excess funds to other banks through the call money market due to lower interest rates, according to market insiders.
The banks prefer to invest their funds in other forms like short-term deposit as well as short notice deposit to other cash-hungry banks instead of call money lending, they explained.
The volume of overall transactions in the call market came down to Tk 66.68 billion on Sunday from Tk 70.33 billion a week before, the BB data showed.
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