Call money market hit by political uncertainty

Political uncertainty and slower economic growth have affected the call money market like many other sectors, Bangladesh Bank data shows.

The call money rate, which banks and non-banks borrow and lend for short-term needs, went as low as 5.5 percent. To cash in on the situation, some banks have stepped in to raise funds. Total turnover for the last seven working days stood at Tk 54,770 crore, averaging Tk 7,824 crore a day.

call moneyBB statistics show state-owned banks (SoBs), foreign and new banks were lenders in the call money market and private commercial banks and non-bank financial institutes the borrowers.

“Call money rate of this level shows lean economic activities and the market is liquid enough,” said Monzur Hossain, research fellow of Bangladesh Institute of Development Studies.

He said SoBs take the chance of earning quick profits as they are generally inefficient in quality lending.

Meanwhile, the slow demand for short-term money has become a boon for non-bank financial institutions as they are getting low-cost money from the market instead of the banks, from where they borrowed at 12 percent interest rates.

-The Daily Star Online.