BB caps call money rate

Posted by BankInfo on Tue, Dec 21 2010 04:53 am

The central bank yesterday capped the call money rate at 50 percent to ease money market volatility.

“Bangladesh Bank has directed us verbally to maintain the rate until further instruction,” said a fund manager of a private bank.

But top bankers questioned the rationale for the ceiling, which they believe too high compared to bank rates.

The call money market witnessed abrupt swings for the past two weeks and soared 180 percent on Sunday.

Bankers had been demanding central bank intervention, but it kept mum for what Bangladesh Bank (BB) officials said curbing the inflationary pressure by reducing money flow into the market.

“I don't know on what logic the central bank has set the ceiling at 50 percent. Still, the rate will contribute to increasing the cost of fund,” said a private bank chief executive officer.

The CEO said some banks borrowed money and lent at higher rates. He suggested a probe by the central bank.

Anis A Khan, managing director of Mutual Trust Bank, however, welcomed the BB move, which he said would help cool down the market.

The central bank has given Tk 7,825 crore through repo yesterday to help banks meet demand for cash, said Mizanur Rahman Zodder, BB's general manager.

Source: The Daily Star