Call Money Rate

Chapter - 1

Introduction

1.1 Origin of the Report

As students of FIN 380, we are assigned to collect information on banks call money rate. Based on the collected information, we have to prepare a report that shows us the real scenario of whether call money rate is affected by bank deposit and loan. This report is aimed as a practical knowledge for the Management of Commercial Banks course of Business Administration program. We are instructed to prepare the report under the consul of our respective course instructor Quazi Sagota Samina on 18th October 2011 and the last date of submission is on 11th December 2011.

1.2 Background of the Study

Job in banking sector is more preferable and suitable for finance major students. So we have to know all the activities of bank to get the challenging job in a top ranking bank. The core activity on which a bank is founded is selling deposit and granting loan for different purpose. Today bank not only provides loan to individual and corporation but also provides loan to other financial institution. Bank charges interest rate called call money rate while lending to financial firm. By preparing this report we will know and understand how call money rate is work and what are the factors affect it.

1.3 Objective Of The Study

We prepare this report base on two purposes-

1.3.1 Broad Objective

To know whether the Call Money Rate affected by bank deposit & loan or not.

1.3.2 Specific Objectives

The mainstay objectives of the report are as follows:

* To know how to organize information and prepare the report

* To know how to collect information on bank call money rate

* To identify and determine correlation between average deposit, average loan and call money rate.

* To identify and determine regression where call money rate is dependent variable, average deposit & average loan is independent variable.

* To know how SPSS work to calculate correlation and regression

1.4 Scope

There is certain barrier as we commence to prepare the report. Here the report is prepared based on four commercial bank's information that mostly conducted at those banks. Manager of those banks do not want to give enough time to know the actual data & even though they are not willing to provide the right information. However we try to get much information through the annual report of these banks to prepare the report at given time.

1.5 Data And Methodology

To prepare such report we need to involve in various sources to make the report relevant and knowledgeable.

In the following section, the detail methodology of the research has been described on the basis of research design, data collection method and analysis. From the view point of function it is a descriptive as well as exploratory research because here we discuss the features of the Call Money Rate as well as find out the effects and relationship among the Call Money Rate, Average Deposit & Average Loan of Commercial Banks and analyze those. From the view point of data nature it is quantitative research. We examine secondary data. The study covers time period from year 2006 to 2010. So try to assemble data and information from both primary and secondary sources. This are-

1.5.1 PRIMARY SOURCES

Conduct with managers of those four commercial banks to collect actual data for this term paper & to understand and know call money rate in detail we communicate on the phone with an employee of brokerage firm.

1.5.2 Secondary Sources

* Bank's websites

* Different PDF file

* Internet

* Annual Reports

1.5.3 Other Sources

Data are collected from various issues of annual report of Securities and Exchange Commission (SEC) of Bangladesh, Quarterly Review of SEC, Monthly Review of Dhaka Stock Exchange (DSE), Bangladesh Economic Review, Statistical Year Book of Bangladesh, Website of different banks of Bangladesh, and Monthly Review of Bangladesh Bank. Correlation matrix, and linear trend equation of key indicators are used for the analysis.

1.6 Definition , Background & Features Of The Call Money Rate

1.6.1 Call Money Rate

Inter-bank money transactions is an important source of funds for the banks. The inter-bank money transactions can be made in the form of inter-bank deposits, inter bank borrowings and inter-bank call money. Among the inter bank transactions, inter-bank call money is known as 'money at call and short notice'.

The interest rate at which a transactions is made in the call money market is known as the inter bank call money rate. The call money rate is determined freely by the banks without the involvement of the central bank.

1.6.2 Background Of Call Money Market in Bangladesh

As an integral part of the financial market of a country, money market provides a medium for the redistribution of short-term loan able funds among the financial institutions. The money market of Bangladesh reached its present phase through a series of changes and evolutions. Structurally, money market in Bangladesh is composed of two broad groups of institutions : the formal institutions which include Bangladesh Bank, 4 NCBs, 30 PCBs, 10 FCBs, 5 SBs and 28 NBFIs. Informal institutions comprises mainly of the money lenders and small co-operative organizations which are not under the control of central bank.

The 5 distinct components under the organized segment of money market in Bangladesh are :

* Inter-bank market

* Call money market

* Bill market

* Repo market

* Reverse repo market

Among them inter-bank call money market is very important for the financial institutions