Term deposit oversubscribed by 90 per cent only

Term deposit oversubscribed by 90 per cent only

Term deposit launched today by the central bank has been oversubscribed by 90 per cent. The central bank floated Rs 20 billion term deposit and it received Rs 38 billion worth bids from 25 banks and financial institutions at 0.69 per cent weighted average interest rate lower than the treasury bills of yesterday. Yesterday roll-over 91-day treasury bills average weighted interest rate stood at 0.0126 per cent. The central bank expected the banks and financial institutions to bid at lesser interest rate for term deposit than they have. The instrument called term deposit allows commercial banks, development banks and finance companies to park their money at the central bank for a period of three months at interest rates fixed through auction. After repeated attempts of  mopping liquidity from the banks and financial institutions in the last fiscal year, the central bank has brought a new instrument of buying deposit called term deposit. Last fiscal year, the central bank had mopped up Rs 611 billion from the banking system using reverse repo – of seven to 14 days – and outright sale auction. However, the central bank was expecting much better response from the banks and financial institutions as they have been sitting over Rs 100 billion. Earlier banks and financial institutions were asking for a long-term monetary instrument to mop up excess liquidity in thee banking system as the reverse repo was the short term instrument. A week ago average rate weighted interest rate of treasury bills stood at 0.002 per cent.
All Rights reserved © 2013 - Designed & Developed by InDesign Media