The crisis of US dollar is intensifying in the inter–bank market that pushed the exchange rate of the greenback to Tk 81.30 on Thursday, sources at the inter-bank money market said.

To overcome the crisis, the Bangladesh Bank (BB) initiated to tighten monitoring over the local kerb market as the rate of US dollar was volatile there during last couple of months, BB sources said.

The banking division also has sought explanation from the managing directors of state-owned commercial and specialised banks to know why the International Monetary Fund (IMF) has criticised the BB authority, state-owned banks and Bangladesh Foreign Exchange Dealer’s Association (BFEDA) for their failure to check drastic devaluation of taka against US dollar.

The global lender has also said that wrong policies of BB and BFEDA caused free fall of US dollar against local currency taka during last one year.

Banking division directives came at a meeting at finance ministry on Wednesday with managing directors of state-owned commercial banks and specialised commercial banks.

Banking Secretary Shafiqur Rahman Patwari presided over the meeting.

“We've bought dollar for Tk 80.95 on the day,” an inter-bank money market official said.

The demand for the greenback increased substantially to meet the growing requirement of foreign currencies by business people and patients at the end of this year, official also said.

A kerb market trader said: ‘The flow of dollar in the open market is being affected due to supply-side constraints’. Besides, the tough Anti-Money Laundering Act has discouraged the expatriate Bangladeshis send their hard-earned money through official channel, which gas worsened crisis for the greenback, he added.

The US dollar sold in the kerb market on the day was nearly Tk 3 more than the rate offered by the state-owned banks at the formal inter-bank market.

The selling rate of the greenback was Tk 84.20 on Thursday against buying rate of Tk 83.50 in the kerb market.

In the formal market, state-owned commercial bank Janata was selling the greenback at Tk 80.70 and buying at Tk 81.70 on Thursday, a treasury official of a commercial bank said.

The US dollar was quoted at Tk 80.88 -Tk 81.75 on Thursday by the private commercial bank AB Bank, while Citi Bank traded it for Tk 80.85-Tk 81.85, according to the central bank data.

Meanwhile, executive director of Bangladesh Bank (BB) Jahangir Alam said the country’s kerb market is now volatile. The unhealthy competition at the market should be stopped to ease dollar rate against local currency taka, he added.

Concerned authorities of the government should monitor the kerb market to stop abnormal hike of US dollar, he added.

Alam also pointed out that crisis of US dollar may intensify in local market as the amount of import raised during couple of months.

The Daily Sun/Bangladesh/ 23th Dec 2011

A new call money market -- Islamic Interbank Fund Market (IIFM) -- will be introduced for the sharia-based banks in Bangladesh .Transactions will be based on profit instead of interest.

Bangladesh Bank Governor Atiur Rahman yesterday approved the proposal for formation of the market.

BB Executive Director SK Sur Chowdhury told The Daily Star that the central bank will issue a circular in this regard in a couple of days and they are hopeful that the market will take off next month.

Although the Islamic sharia-based banks have got about 20 percent market share of the total asset and liability in the banking industry, they have no inter-bank sharia-based market, Chowdhury said.

As a result, the banks faced problem in excess liquidity management, and on the other hand if a bank needed money suddenly, unlike the commercial banks, they had no option, Chowdhury said.

The IIFM will solve this problem of the Islamic banks.

In the call money or overnight money market, the commercial banks make direct transactions with other banks. But in case of a sharia-based call money market, the banks will transact with each other through a separate fund which will be under the custodianship of the central bank.

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

Another Islamic bank requiring fund will borrow the money from the IIFM for one day.

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

Giving an example, the BB official said, if four banks invest Tk 6 lakh in the IIFM and three banks borrow the amount, and if the borrower banks log 12 percent profit in three months, the borrower banks will pay the lender banks their one day's profit calculated on the basis of the 12 percent profit.

The IIFM will be operated from the securities division of the central bank's Motijheel office.

The proposed rules for the new fund market were finalised by the central bank in consultation with the chief executive officers of seven Islamic banks on Wednesday.

In recent times, Tk 32,000 crore to Tk 36,000 crore remains as excess liquidity with the 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.

Besides, the central bank has taken an initiative to amend Islami Bond Rule 2004 so the Islamic banks and financial institutions can participate more in the Islamic financial market.

The Daily Star/Bangladesh/ 23th Dec 2011

Bangladesh Bank has increased the special repo rate by 1 percentage point in an effort to contain high inflation.

The central bank hiked the rate to 10.25 percent on Tuesday from 9.25 percent before, a BB official said.

The central bank usually increases the repo rate to contain inflation. This time, the central bank used the special repo rate as a monetary tool to avoid wrong signals to the stockmarket, said an official of a commercial bank.

The repo rate is the interest rate at which the central bank lends money to other banks. If any bank borrows from the central bank after 12 noon, it is called special repo rate, which means borrowing is expensive for primary dealer banks.

An International Monetary Fund team has recently asked the BB to raise the repo rate to around 11 percent as a condition for the possible $1 billion loan to Bangladesh. At present, the repo rate is 7.25 percent.

In more than one month, the central bank has not been lending to any bank through repo. It has been done through special repo, according to data from the central bank.

On two days -- December 20 and 21 -- the BB did not give any money via repo but lent about Tk 7,500 crore to the banks through special repo.

Inflation has been above 10 percent for the last one year. As a result, if any bank borrows from the central bank, the rate should be above the inflation rate, the BB official said.

The Daily Star/Bangladesh/ 23th Dec 2011

Yasmeen Haque, director of Mutual Trust Bank, inaugurates the 75th branch of the Bank on Shah Mokdum Avenue in Dhaka recently. Anis A Khan, managing director, was also present.

The Daily Star/Bangladesh/ 23th Dec 2011

Muklesur Rahman, deputy managing director of Eastern Bank, inaugurates the 59th branch of the Bank in Rangpur town yesterday.

The Daily Star/Bangladesh/ 23th Dec 2011