The call money (CM) rate remained almost stable on Monday, the last working day before the Eid vacation, as banks were flooded with excess liquidity amid poor credit demand due to the ongoing Covid-19 pandemic, bankers said.
The weighted average rate (WAR) on inter-bank call money came down to 2.06 per cent on the day from 2.20 per cent of the previous working day. It was 2.15 per cent a week ago, according to the Bangladesh Bank (BB) latest statistics.
On the other hand, the volume of transactions in the inter-bank call money market rose to Tk 34.76 billion on Monday, from Tk 30.18 billion a day before. It was Tk 31.94 billion on July 12, the BB data showed.
Such short-term borrowing normally increases before festivals, as demand for cash grows.
However, the call money rates ranged between 1.00 per cent and 5.25 per cent on Monday, remaining unchanged from the previous level.
Most of the deals were settled at rates varying between 1.00 per cent and 5.00 per cent, according to the market operators.
Actually, the deals were settled at rates ranging between 1.00 per cent and 2.00 per cent among the banks, while the non-banking financial institutions (NBFIs) borrowed money at interest rates varying between 2.00 per cent and 5.25 per cent from the banks, they added.
Besides, the banks provided funds with an interest rate of more than 0.50 per cent in the name of Short Notice Deposit (SND).
They noted that the demand for cash money decreased following increased use of debit and credit cards as well as other alternative delivery channels (ADCs) in the recent months.
"A section of people prefer to withdraw cash money from the banks using debit and credit cards to avert health hazards," a senior executive of a leading private commercial bank (PCB) told the FE while replying to a query.
He also said most of the people now prefer transactions through ADCs on the same ground.
The ADCs cover the operations of ATM (Automated Teller Machine), POS (Point of Sale), e-Payment Gateway and Mobile Financial Services (MFS).
Transactions using the digital channels, such as ATM, internet or online and mobile, normally increase significantly during the weekends and other holidays. Talking to the FE, another private banker said pressure of cash withdrawal from the banks is easing gradually, as the use of credit and debit cards, referred to as plastic money, is increasing in Bangladesh.
"A good number of people are now connected with MFS, agent banking and e-banking that reduces the tendency of holding cash money to their wallets," he noted.
Meanwhile, excess liquidity with all the scheduled banks nearly doubled in April 2021, following significantly lower private credit growth - mainly due to the ongoing pandemic.
The surplus liquidity grew by more than 78 per cent to Tk 2,016.78 billion as on April 30, from Tk 1,130 billion a year before. It was Tk 2,047.18 billion as on December 31, 2020, according to the BB statistics.
The private sector credit growth came down to 7.55 per cent in May 2021 on a year-on-year basis, from 8.29 per cent a month ago mainly due to the ongoing second wave of the Covid-19 pandemic.
It was 7.25 percentage points lower than the central bank's target of 14.80 per cent for the second half (H2) of the outgoing fiscal year.