9:28 PM
Bangladesh Bank has received reverse repo bids worth Tk 36,711 crore from banks and non-bank institutions so far this month but did not accept any of the offers considering that the move would cost them heavily.
The auction of reverse repo, a monetary policy instrument with which the BB mops up excess funds from the market, has remained suspended since November 16. The central bank uses the tool to control the money supply.
Commercial banks get incentives to park their funds with the BB. The reverse repo rate has remained unchanged at 5.25 percent since February 2013, but it is still higher than the call money rate at around 2 percent.
To avoid paying more as interest, the central bank is now taking money from banks and non-bank financial institutions through 30-day Bangladesh Bank Bill. The bill carries less than 4 percent interest.
“We want the banks to invest their money in the real economic sectors,” said Allah Malik Kazemi, change management adviser to the BB.
The BB has formed several teams to help commercial banks find out potential sectors for financing, according to Kazemi.
Banks should invest depositors' money in meaningful activities and not park it with the BB, he said.
Though the central bank is not entertaining banks with reverse repo, it is taking banks' surplus funds through the BB Bill, according to officials.
“We have to count interest of about Tk 100 crore a month for taking money from commercial banks through BB bills,” said a senior BB official.
The auction of 30-day bill was held last Monday, in which 65 bids amounting to Tk 8,605 crore were offered.
Of them, 24 bids amounting to Tk 4,600 crore were accepted, with weighted average yield at 3.91 percent a year.
On the other hand, the BB received eight bids of three-day tenor amounting to Tk 7,657 crore at the reverse repo auction yesterday but it did not accept a single bid.
There are different views in the market about the surplus funds in the banking sector. Some say that there are around Tk 100,000 crore in excess funds, but the central bank differs strongly.
The amount would be Tk 20,000 crore to Tk 23,000 crore, according to Kazemi, also a former deputy governor of the BB.
The Daily Star spoke to the chief executive officers of two commercial banks on the surplus funds in the banking industry, but they declined to be named fearing the regulator's wrath.
“I am not getting any borrower. It seems everything is on hold,” said one of the chief executives.
The other official said his bank is discouraging taking deposits as they cannot invest the money. The call money rate has gone down below 2 percent and it reflects the poor demand for money in the market, he said.
Daily Star
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