Written by The Banking Post
Bangladesh’s money market showed tentative signs of relief in August, as banks scaled back borrowing from the central bank’s repo window while leaning more on overnight funding and standing facilities.
Total call money turnover edged down 0.6% to BDT 116,125 crore, the first monthly dip since May. Overnight transactions rose slightly, accounting for nearly 88% of the market, while the weighted average overnight rate slipped 9 basis points to 9.98%. Despite the modest decline, the rate remains about 120 basis points higher than a year ago, underscoring persistent tightness in short-term liquidity.
The sharper adjustment came in the repo market. Interbank repo transactions fell 16.5% to BDT 25,325 crore, with overnight repos making up half the volume. Rates there softened to 9.90%, down 21 basis points from July. Meanwhile, borrowing from Bangladesh Bank’s own repo facility dropped almost 30% to BDT 109,351 crore, with banks largely tapping 14-day repos after the 28-day tenor remained suspended.
Yet pressure on funding lines has not fully abated. Banks turned more aggressively to the Standing Lending Facility, drawing BDT 26,332 crore in August — nearly 50% more than in July. Deposits into the Standing Deposit Facility also ticked up, reflecting a shift in central bank intermediation rather than a clean easing of conditions.
On the fiscal side, the government’s short-term borrowing needs eased. Treasury bill issuance declined by 7% to BDT 31,500 crore, while cut-off yields across maturities edged lower, ranging between 10.12% and 10.37%.
“The picture in August is one of moderation,” said a Dhaka-based economist. “Banks are borrowing less through repos, but increased reliance on standing facilities shows liquidity strains are still very real. The central bank is carefully withdrawing support without letting markets seize up.”
With money market rates clustering around the central bank’s policy corridor near 10%, analysts expect Bangladesh Bank to maintain its balancing act in the coming months — tightening liquidity just enough to restrain inflation, while ensuring that short-term funding channels remain intact.
