Assignment no: 01

Date: 02-06-2014








Submitted To Submitted By
Md. Yousuf Harun MD. Anik Islam
Lecturer 2012-1-13-048
Department of BBA Course Code: FIN 335
East West University Section: 03
Wednesday, November 2, 2011
Business
Call-money rate rises ahead of Eid
Star Business Report

The central bank is trying to control the inter-bank call-money market, but is not supporting
commercial banks adequately with repo, an important tool in the stability of the money market,
bankers said yesterday.

Bangladesh Bank as the regulator advised the commercial banks to maintain the inter-bank call
money rate within 21 percent during the Eid-ul-Azha when demand for money goes up.
The call money rate was the highest at 17 percent yesterday. The rate was 19 percent for non-
banks.

The bankers expected that the rate may reach 19 percent today and 21 percent tomorrow, the last
workday before the Eid. A total of Tk 4,705 crore traded in the call money market yesterday,
according to data from Bangladesh Bank.

"The central bank has directed us verbally to maintain the rate during the Eid time," said a fund
manager of a private commercial bank.

But bankers questioned the central bank's role in repo support, especially to the primary dealer
(PD) banks.

"Primary dealers wanted Tk 5,300 crore repo support yesterday, but Bangladesh Bank gave us
Tk 4,628 crore," said the head of treasury of a bank.

Primary dealer banks were the main borrowers in the inert-bank call money market as a huge
amount of their money is invested in government securities. There are 15 primary dealers: three
are state-owned banks, nine private banks and three non-bank financial institutions.
The inter-bank call money market is an overnight market which mainly serves commercial banks
in meeting their immediate liquidity needs and reserve deficiencies.

Bankers said the orderly and stable functioning of the inter-bank call money market is important
to minimise liquidity risks in the banking system as a whole and the stability of the market is
supported by the provision of repurchase and reverse repo facilities by the BB at its policy
interest rates.

The normal repo rate is 7.25 percent, which becomes 9.25 percent in special cases. The central
bank lent Tk 304 crore at normal repo rate and Tk 2,300 crore at special rate, data show