Non-banks asked to depend less on call money

The central bank has recently asked non-bank financial institutions to reduce their dependence on call money -- a short-term bank loan repayable on demand.

The directive has forced many non-banks to adjust their additional exposure, causing a fall in interest rate and a rise in transactions.

“We have been asked verbally to bring down our reliance on call money, which doesn't generate any revenue for the government,” the chief executive of a non-bank said.

A non-bank had a transaction ceiling of Tk 154 crore in the call money market, which came down to Tk 100 crore in February and went down further to Tk 50 crore this month. So, the financial institutions with higher exposure were forced to make the adjustments.

The weighted average call money rate declined to 7.63 percent on March 12, down from 8.25 percent a month ago, according to Bangladesh Bank data.

Around Tk 5,491 crore was transacted in the call money market on February 12, which shot up by more than 25 percent to Tk 6,876 crore on March 12.

Asad Khan, president of Bangladesh Leasing and Finance Companies' Association, said the BB directive was good for the industry as there are alternative products in the market.

“We can take deposit directly instead of borrowing from the call money market,” said Khan, also the managing director of Prime Finance.

Call money is still an important source of money for the non-banks. Transactions in the call money market increase and get volatile ahead of Eid-ul-Fitr and Eid-ul-Azha, the two biggest festivals in Bangladesh.