A new type of call money market -- Islamic Inter-bank Fund Market (IIFM) -- for sharia-based banks started its journey yesterday.

In such a market, transactions are based on profit instead of interest.

Bangladesh Bank Governor Atiur Rahman inaugurated the IIFM at the central bank.

On the first day, Islami Bank Bangladesh Ltd offered funds worth Tk 100 crore, while four banks applied for taking Tk 60 crore from the funds.

In December last year, the BB issued a circular about the IIFM but its launch was delayed due to a dearth of the required fund.

The BB governor said the IIFM has been formed in the model of the traditional call money market to remove the temporary and short-term liquidity crisis of the Islami Banks.

The Islamic Bond Fund of the central bank will act as the custodian of the IIFM and will not charge any fees for the fund.

According to rules, if any bank has excess fund, it will invest the amount in the IIFM for one day.

Another Islami Bank requiring fund will borrow the money from the IIFM for one day.

The rate of profit in the Islami Bank call money market will be determined on the basis of the profit the bank gives to its depositors on a three months' deposit.

Besides, the central bank has taken an initiative to amend Islamic Bond Rules 2004 to enable the Islamic banks and financial institutions to participate more in the Islamic financial market.

The central bank governor said the amendment to Islamic bond rules is now under consideration of the finance ministry and the changes will be finalised soon.

In recent times, Tk 32,000 crore to Tk 36,000 crore remains as excess liquidity with all commercial banks. Of the amount, around Tk 3,000 crore to Tk 4,000 crore is with the Islamic banks which they cannot invest and so the amount remains idle.

According to the central bank statistics, the Islami Banks account for around 18.42 percent or Tk 86,707 crore of the total deposits at all the banks.

The Daily Star/Bangladesh/ 4th June 2012