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Banks’ overnight borrowing from the call money market almost doubled in the second half of the month of August compared with that in the first half of the month after the relaxation of Covid-centric restrictions and subsequent reopening of business and economic activities.
Bangladesh Bank data showed that the average borrowing of the banks from the call money market increased by 84 per cent or Tk 2,798.12 crore to Tk 6,139.06 crore in the second half of August from Tk 3,340.93 crore in the first half of the month.
The country’s call money market had remained dull since a fresh wave of the Covid outbreak in the country in April when the government imposed strict restrictions on movement to contain coronavirus infections.
Before the fresh wave of the outbreak, the daily borrowing by banks was around Tk 4,000 crore to Tk 5,000 crore. The transactions through the call money market dropped to around Tk 3,000 crore afterwards and the situation had remained almost the same before the relaxation of coronavirus-centric restrictions on August 11.
In January and February 2021, transactions through the call money market increased above Tk 6,000 crore when the business and economic activities were almost normal.
The banks’ borrowing from the call money market had declined gradually since the second half of the month of March with the spike in coronavirus infections that prompted the government to issue strict restrictions from April 5.
The government relaxed the restrictions on public movement and business activities on August 11 by reopening all government and non-government offices, shopping malls, markets, shops, restaurants and hotels and resuming services of public transports.
Immediately after the relaxation of the restrictions, the businesses resumed their activities that boosted the country’s local as well as international trade and the situation resulted in an increased demand for the taka and the dollar, bankers said.
Amid the increased demand for the taka and the dollar, the gradual decline in remittance in the last couple of months compelled the central bank to resume its dollar selling after purchasing the greenbacks since the outbreak of the pandemic in March 2020.
Triggered by the increased demand, the exchange rate of dollars on the interbank money market reached an all-time high of Tk 85.2 on Sunday even after the injection of the greenbacks by the central bank.
The BB’s dollar sales on the interbank money market coincided with the central bank’s move to mop up the taka from the money market to bring down the volume of excess liquidity in the banking sector.
Consequently, the demand for the local currency increased on the overnight money market.
An official of the central bank said that the BB was observing the money market situation closely and would continue with its expansionary monetary policy stance in FY22.
The BB has tools to increase money supply on the market whenever it would be required.
The demand for call money has increased at a time when the amount of excess liquidity reached a record high of Tk 2.31 lakh crore from around Tk 1.15 lakh crore 15 months ago.
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