Abstract

The report is all about money market and its role to economic growth in Bangladesh. The
objective of this report is to analysis the role of money market in Bangladesh economy. For
the purpose of preparing an effective and informative report data has been collected from
different secondary sources like newspaper, journal or articles, Stock exchange website,
Bangladesh Bank publications. Money market provides short term financing for assets that
are taking part in short term lending, borrowing, selling and buying whose maturity does not
exceed one year. Money markets play a key role in banks liquidity management and the
transmission of monetary policy by providing the appropriate instruments for liquidity
trading, control of money supply and demand-pull inflation, determination of short-run
interest rate. It is usually well known that in money market there are two main participants:
supplier and demander of money market securities. Several money market securities traded in
money market like Treasury bill, Repo, Reverse Repo, Call Money Market, Commercial
paper etc. The rate of T-bill varies according to the maturity of the bill currently as of 91-Day
T-bill rate is 2.85 %, 182-Day T-bill rate is 4.2%. CP is a highly promising product for a
developing country like Bangladesh as it fosters the goal of reducing cost of borrowing which
can stimulate growth. Through CP, companies can now get funds at lower cost compared to
bank loans. Eastern Bank Limited is the pioneer of CP in the country; it raised Tk. 500
million for ACI Limited in 2013. With lower repo and reverse repo rates, industry gets to
borrow more and even gets to pay lower interest rates on its borrowing. Therefore, those
businesses that are in a position to secure additional lending from the banking system will
benefit from lower repo and reverse repo rates. Call money rate enables the banks &
institutions to even out their day to day deficit-surpluses of money. Money market funds
provide valuable liquidity by investing in commercial paper, and repurchase agreements.
Money market helps the industries in securing short-term loans to meet their working capital
requirements through the commercial papers. Money market enables the commercial banks to
use their excess reserves in profitable investment. The existence of a developed money
market smoothens the functioning and increases the efficiency of the central bank. Money
market is an avenue for central bank intervention in influencing both quantum and cost of
liquidity in the financial system, thereby transmitting monetary policy impulses to the real
economy. It is also important that efficient functioning of the money market is required for
the effectiveness of monetary policy.
Table of Contents
 PARTICULARS PAGE NO.

Declaration I
Letter of Authorization II
Acknowledgement III
Letter of Transmittal IV
Executive Summary
Acronyms
Chapter 1 1-3
1.0 Introduction 1
1.1 Objective of the Report 2
1.2. Scope of the Report 2
1.3 Methodology 2
1.5 Limitations 3
Chapter 2 4-19
2. 0 The role of money market to economic growth in 4
Bangladesh
2.1. Money Market & its Background from Bangladesh 5
Perspective 6
2.2 Characteristics of Bangladeshi Money market & its 8
Participants 8
2.3 Money Market instruments & its role to the Growth of 11
Economy
2.3.1 T-bill & its significance to the economy of 13
Bangladesh
2.3.2.1 Commercial paper prospects & how its play a role 14
to growth of economy in Bangladesh 16
2.3.3 Repo & Reverse Repo Scenario in Bangladesh and 17
how it helps to the economy 17
2.3.3.3 Significance of Call money Rate to the Economy
2.3.5 Negotiable Certificates of Deposit (NCDs) 17
2.3.7 Bankers Acceptance 17
2.4 Summary of how Money Market contributes in economic 18
growth of Bangladesh 18
2.4.1 Meeting LIQUIDITY Purpose 18
2.4.2 Encouragements to saving and investment 18
2.4.3 Financing Industry 19
2.4.4 Controlling Inflation 19
2.4.5 Profitable Investment
2.4.6 Self-Sufficiency of Commercial Bank
2.4.7 Help to Bangladesh Bank
2.4.8 Financing Trade
Chapter 3
3.0 Findings 21
Chapter 4
4.0 Recommendations and Conclusion 24
4.1 Recommendations & Conclusions 24
4.2 Bibliography 25
Appendix 26
 Accronyms

List of Acronyms
NBFIs Non-Bank Financial Institutions
BB Bangladesh Bank
SOCBs State Owned Commercial Banks
NCBs Nationalized Commercial Banks
FCBs Foreign Commercial Banks
PCBs Private Commercial Banks
T-Bill Treasury Bill
PD Primary Dealer
OMO Open Market Operations
FY Fiscal Year
CP Commercial Paper
IPA Issuing & Paying Agent
LSF Liquidity Support Facility
NCD Negotiable Certificate of Deposit