The interbank call money rate has crossed 10 per cent after nearly 11 years following an increase in the policy rate by the Bangladesh Bank.
The call money rate increased to 10.03 per cent on November 14 from 9.91 per cent on October 31 per cent and 9.01 on June 30.
The rate in November 14 was the highest after January 2013 when it was 10.29 per cent.
On October 22, the central bank increased the policy rate by 50 basis points to 10 per cent, which became effective on October 27.
The bank regulator continued raising the rate with the aim of tightening money supply to control inflation.
The BB has begun to hike policy rate sharply since May 2022 when it was at 5 per cent. It raised the policy rate for the fifth time in the current year.
Apart from the repo rate, the highest ceiling on policy rate corridor of standing lending facility rate has been increased by 50 basis points to 11.5 per cent while the lowest limit on standing deposit facility rate has been raised to 8.5 per cent.
The special repo rate was renamed as the SLF and the reverse repo renamed as the SDF.
Due to the jump in policy rate, lending rate was hovering at 15-16 per cent in many banks.
Therefore, businesses became worried as cost of doing business kept rising, which eventually would affect business production and profitability, bankers said.
The call money rate is the interest rate on a short-term or overnight loan from one bank to another to meet an urgent requirement.
Increased liquidity pressures have also led to a steady rise in the weighted average call money rate since June past year, when it stood at 6 per cent.
Inflation increased to 10.49 per cent in October from 9.92 per cent in September.
The inflation has remained over 9 per cent since March 2023, driven by escalating prices of essential commodities.
The rise in inflation also created credit demand, bankers said.
Banks typically resort to emergency loans like call money to rectify asset-liability mismatches, fulfil statutory CRR and SLR requirements and respond to sudden surges in fund demands.
The call money rate began its sharp ascent after March 21, 2022, when it stood at 2.05 per cent, according to the BB data.
Bankers said that the government鈥檚 increased borrowing from the banking system, BB鈥檚 dollar sales to banks to settle import bills and a rise in treasury bill rates had created stress on the banking sector liquidity over the years.
Besides, massive loan irregularities and capital flights during the recently deposed Awami League regime worsened the liquidity crisis in the banking sector, they said.