The money market in Bangladesh witnessed a sharp rebound in September as interbank repo transactions more than doubled that month.
Additionally, call money turnover hit a record high at the same time, indicating a temporary easing of liquidity stress across the banking system, according to the latest Money Market Dynamics report released by Bangladesh Bank.
The total turnover in call money and repo operations jumped to Tk 3.6 lakh crore, with the interbank repo segment alone surging by 114 percent from its value in August. The overall call money rate eased slightly to 10.04 percent, signalling that short-term funding pressures subsided after months of strain in the banking sector.
According to central bank data, interbank repo transactions soared to Tk 54,132 crore in September from Tk 25,325 crore a month earlier. Among them, the seven-day repo dominated with a 38 percent share, up from just 10 percent in August. The weighted average rate of repo settled at 9.94 percent, down 7 basis points, indicating stronger collateral-based liquidity exchange between banks.
“The surge in interbank repo suggests that banks are more confident to lend against securities rather than rely on central bank windows,” a senior Bangladesh Bank official told TIMES.
At the same time, turnover in the call money market rose 26.6 percent to Tk 1.47 lakh crore, the highest since the fiscal year began. Nearly 87 percent of all call money transactions were overnight, with the weighted average rate slipping by 1 basis point to 9.97 percent.
Short-notice and term call money, which involve lending beyond one day, also expanded by 23 and 73 percent respectively. Compared with the same period last year, the total call market volume was up 78 percent, reflecting higher demand for short-term funding despite stability in the overall rate.
In contrast, central bank repo lending fell 9 percent to Tk 99,568 crore, showing that banks were less dependent on Bangladesh Bank’s direct liquidity support.
The 14-day tenor continued to dominate, with a nearly 79 percent share of the central bank’s total repo transactions.
Bangladesh Bank maintained a fixed repo rate of 10 percent, consistent with the current monetary policy corridor.
Liquidity shifts toward deposit facilities
A notable trend emerged in the standing facilities window, where commercial banks sharply reduced borrowing and increased deposits with the central bank. Use of the Standing Lending Facility (SLF) plunged 96.8 percent to Tk 850 crore while usage of the Standing Deposit Facility (SDF) surged 36.5 percent to Tk 36,533 crore.
This reversal signals that “liquidity in the banking system has improved, allowing banks to park surplus funds rather than seeking central bank loans,” said a central bank analyst.
Meanwhile, use of special liquidity facilities dropped 49 percent to Tk 60,332 crore, with the Assured Liquidity Support (ALS) for primary dealers declining to Tk44,040 crore. This category accounted for 73 percent of all special facilities.
Year-on-year, banks’ reliance on these emergency tools fell by nearly half, consistent with stronger interbank activity.
The government also issued Tk 36,000 crore in treasury bills during September – 14 percent higher than in August – but the cut-off yields fell across all tenors, from 14-day to 364-day bills. The 91-day T-bill yield slipped to 9.96 percent while the 364-day yield declined to 9.88 percent, reflecting a softer short-term interest environment.
Liquidity comfort returns
Across instruments, the co-movement of call money, interbank repo and central bank repo points to a gradual normalisation of liquidity. While banks’ demand for short-term funds remain high, they increasingly relied on market channels rather than the central bank for liquidity management.
September’s figures suggest that the banking sector experienced a liquidity-comfortable, rate-stable phase, with interbank confidence improving and funding costs contained within the policy corridor.
“The shift toward collateralised funding and lower reliance on Bangladesh Bank repo indicates a more mature and stable money market structure,” said Nazrul Islam, treasury head of Rupali Bank PLC.
