The transaction at the interbank call money market, a key source of short-term liquidity among banks, surged significantly in July 2025 as banks redirected their idle funds to the overnight market instead of placing them with Bangladesh Bank鈥檚 Standing Deposit Facility (SDF).
According to the central bank鈥檚 latest report, turnover in the call money market stood at Tk聽1,16,852.13 crore in July, marking a 31.6 per cent increase from June.
Bangladesh Bank officials attributed this rise to banks鈥� shifting preference for short-term lending as yields on government treasury bills and bonds have been declining sharply in recent weeks.
The interest rates on T-bills and bonds dropped to between 10 per cent and 10.48 per cent in July, compared with 11 per cent to 12.75 per cent in June.
With lower returns on treasury securities, banks sought better avenues to deploy their excess liquidity, leading to greater participation in the call money market.
The report further showed that daily average turnover in the call money market also increased to Tk聽5,310.55 crore in July from Tk 4,221.39 crore in June, reflecting stronger liquidity circulation among banks.
The weighted average interest rate on call money hovered 9.75 per cent in July, offering banks a relatively attractive return compared with the declining yields on treasury instruments.
At the same time, investment through the SDF 鈥� where banks park their surplus funds with the central bank 鈥� declined sharply.
Commercial banks used SDF facility for Tk聽26,146.90 crore which was Tk聽46,583.32 crore (64.05 per cent) lower than that of Tk 72,730 crore in the previous month.
It indicated that banks preferred interbank lending opportunities over central bank facilities, expecting higher returns and more flexible use of liquidity.
Bangladesh Bank reduced the SDF rate further to 8 per cent in July suggesting that the central bank is aware of excess idle liquidity in the system and is trying to encourage banks to lend more actively in the open market.
The shift also comes at a time when demand for liquidity in the banking sector remains uneven.
Some banks, particularly those under stress from mounting non-performing loans, continue to face liquidity shortages, while others with strong deposit growth are left with idle cash.
The call money market serves as a balancing mechanism, allowing banks with surplus liquidity to lend to those in deficit on an overnight basis.
The central bank鈥檚 data also indicated that borrowing from its Standing Lending Facility (SLF) rose massively to Tk聽17,566 crore in July from just Tk 1,890 crore in June, suggesting that a section of banks relied on BB鈥檚 emergency borrowing window to meet liquidity shortfalls despite higher interbank activity.
The increased turnover in the call money market suggests that banks are efficiently reallocating funds to optimise returns amid declining government securities yields. On the other hand, it reflects underlying stress in the financial system, as reliance on short-term borrowing often signals structural weaknesses in liquidity management, bankers said.
They cautioned that if treasury yields continue to fall, banks may rely more heavily on call money transactions, heightening volatility in short-term rates.
