Interbank transactions hit the ceiling

The interbank market volumes rose to 100bn/-on Wednesday, the largest amount to trade in the last three years, on the back of huge demand by banks to execute lending obligations.
Under normal circumstances, the interbank trades below 50bn/-, but the voluminous trading shows that commercial banks are in dire need of funds to foot their lending portfolio.

However, despite the huge amount, average interest rates remained at the range bound around five per cent because the liquidity level in the economy has improved considerably.  Average rate rose to 5.57 per cent from 5.03 per cent.

Orbit Securities Head of Operations and Dealings Juventus Simon told the Daily News that the huge volume traded yesterday signifies increasing activities in the economy.

“The economy is experiencing booming activities that drive demand for money to facilitate these activities,” Mr Simon said. 

He added: “The high demand for money to purchase agricultural produce like coffee and cotton and normal spending in the second half have fueled trade activities.” 

Standard Chartered Bank said the increase was the highest in the last three years after shooting almost five fold from Tuesday’s 22.3bn/- to push the highest rate of eight per cent, the five-week high.

National Microfinance Bank (NMB) said overnight lending rates reached a new high of eight per cent, with tightness continuing to be felt since early last week.

The liquidity tightness, which hit the market in the first half of this year, was the results of Bank of Tanzania’s measures to curb high inflation and reverse the shilling depreciation.  

In recent days, several banks have resorted to stage deposit raising promotions to raise funds to carter for loans and advances portfolio. The banks include NMB, National bank of Commerce (NBC), and ECO Banks.
Source: The Daily News, reported by Abduel Elinaza
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