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Banks’ overnight borrowing through interbank call money market grew by 65 per cent or Tk 1,19,698 crore in the first two months (January-February) of 2022 compared with that in the same period of 2021 as banks observed higher credit demand following a gradual economic activities restoration.
According to Bangladesh Bank data, banks’ borrowing through interbank call money market increased to Tk 3,04,545.72 crore in the first two months of 2022 against Tk 1,84,847.26 crore in the same period of the previous year.
The demand for cash on the money market increased as the credit demand of the private sector has just started crawling up amid restoration of business and economic activities.
The latest BB data showed that the private sector credit growth increased to 11.07 per cent at the end of January. The growth rate was only 8.35 per cent at the end of June of FY21.
The projected growth rate for the fiscal year 2021-2022 was set at 14.8 per cent.
BB officials said that less than projected recovery from the borrowers against the disbursed loans was a major reason for the demand for liquidity on the interbank money market.
The year-on-year growth of reserve money or M1, BB bills or paper money or coins in circulation outside of the BB, has dropped significantly in recent months after posting a massive growth in FY22.
The BB data showed that the central bank in different forms injected money into the economy after the outbreak of coronavirus, taking the growth rate of reserve money to 22.35 per cent in FY21.
The aim of the central bank behind the injection of increased amount of liquidity was to support economic revival.
The year-on-year growth, however, dropped to 7.33 per cent in January 2022.
If compared with the amount of reserve money in June 2021, the M1 dropped by 7.12 per cent in January 2022.
The amount of reserve money was Tk 3,48,071.80 crore in June 2021 and the amount dropped to Tk 3,23,298.90 crore at the end of January 2022.
BB officials said that the central bank in the first half of FY22 took initiative to contain the money supply after the amount of excess liquidity in the banking sector reached a record high of Tk 2.31 crore.
In the first half, the central bank resumed auction of BB bills after more than three years.
Apart from these, the heavy sales of the US dollar to meet the import spending also automatically reduced the money circulation.
So, the demand for liquidity in the banks was on the rise and so was the demand on the call money market, said BB officials.
(NA)
