Borrowing through repo instruments plunged in August as Bangladesh Bank scaled back its liquidity support and commercial banks adjusted to a tighter money market.
The central bank鈥檚 repo transactions fell by nearly 30 per cent to Tk聽1,09,351 crore compared with that in the previous month, with 14-day repos making up over 72 per cent of the total.
The decline followed recent policy changes, including the suspension of the 28-day repo facility in April and the reduction of the Standing Deposit Facility (SDF) rate to 8 per cent, which together reshaped short-term liquidity management.
Bangladesh Bank Repo is a short-term loan from the central bank to banks by selling government securities with an agreement to repurchase them later.
At the same time, interbank repo transactions slid by 16.5 per cent to Tk聽25,325 crore, though overnight repos gained prominence, accounting for half of the turnover.
The weighted average rate on interbank repos fell by 26 basis points to 10.01 per cent, indicating softer demand for short-term funds.
Call money transactions, by contrast, held relatively steady at Tk聽1,16,125 crore, only marginally lower than July.
Overnight call dominated the segment with Tk聽1,01,693 crore, while short-notice and term call money both fell sharply.
The call money weighted average rate eased slightly to 10.05 per cent, reflecting cautious lending amid ongoing liquidity adjustments.
Standing facilities, however, gained traction.
Banks鈥� reliance on the Standing Lending Facility (SLF) surged nearly 50 per cent to Tk聽26,332 crore, while deposits in the SDF inched up to Tk聽26,765 crore.
SDF is window where banks park their surplus funds with Bangladesh Bank and earn a fixed interest, and SLF is a window where banks borrow overnight funds from Bangladesh Bank when they face liquidity shortages.
The simultaneous rise in SLF borrowing and SDF placements shows banks balancing liquidity mismatches. Some institutions faced shortages while others parked excess funds at the central bank.
Special liquidity facilities also contracted, dropping 17 per cent from July to Tk聽1,18,010 crore, mainly due to a steep fall in assured liquidity support (ALS) for primary dealers.
This suggests that banks and dealers are adjusting to reduced dependence on central bank liquidity, though overall use of these facilities remained higher than a year earlier.
In the government securities market, treasury bill issuance fell 7.35 per cent to Tk聽31,500 crore in August, with cut-off rates easing across tenors.
The lower rates reflected subdued demand pressures as liquidity conditions stabilised despite the decline in repo transactions.
Economists said that the plunge in repo activity signals a cautious shift in liquidity management after Bangladesh Bank鈥檚 recent policy changes.
By cutting the SDF rate and scrapping the 28-day repo, the central bank aimed to strengthen the interest rate corridor and reduce distortions in short-term funding.