Bangladesh鈥檚 money market showed growing signs of stress in October as banks leaned heavily on short-term borrowing while liquidity support from the central bank fell sharply.
The recent Bangladesh Bank report indicated rising reliance on volatile market instruments, a sharp drop in central bank repo use, and a surge in demand for safe deposit facilities.
Together, these trends point to uneven liquidity conditions despite stable policy rates.
The call money market, which is the main channel for banks to meet day-to-day funding needs, remained highly active but showed signs of strain.
Total call money turnover stood at Tk 1.43 lakh crore in October, only slightly lower than in September.
Overnight loans made up more than 85 per cent of all transactions, reflecting banks鈥� growing dependence on the shortest-term funds.
The weighted average rate eased a little to 9.81 per cent.
Banks shift toward interbank repo borrowing sharply.
Turnover in this segment jumped 33 per cent to Tk 71,785 crore.
Repo transactions are collateral-backed, meaning banks typically turn to them when unsecured funding becomes harder to access.
Seven-day repo volumes were the largest, indicating聽 that banks needed certainty for more than just overnight operations.
While interest rates in this segment remained around 9.88 per cent, the rising demand signals tightening cash positions within the system.
In contrast, banks sharply reduced their dependence on central bank repos.
Total use of the Bangladesh Bank repo window fell by 38 per cent to Tk 61,578 crore.
Most borrowing came through the 14-day tenor, but even that dropped significantly.
Lower central bank repo use may reflect stricter access conditions or banks choosing market borrowing despite higher volatility.
Another notable development was the steep rise in the use of the Standing Deposit Facility (SDF), which allows banks with surplus cash to park funds at the central bank.
Banks placed Tk 66,955 crore in SDF in October, up 83 per cent from the previous month.
This indicates that some banks had excess liquidity even as others faced shortages, pointing to widening disparities among banks.
At the same time, use of the Standing Lending Facility remained very low, reflecting hesitation in borrowing at the rate of 11.5 per cent.
Special liquidity facilities also dropped sharply by one-third since September. Assured Liquidity Support (ALS), usually taken by primary dealers, fell by nearly 59 per cent. The decline suggests that banks may be avoiding medium-term borrowing in an uncertain interest-rate environment.
