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Liquidity crisis cause call money at high interest rate

Liquidity crisis cause call money, Liquidity crisis banks accepting interbank call money at a high rates. Banks collect deposits from the public and a large portion of these are loans to traders. And Makes a profit by investing. The major share of the bank’s income comes from lending.

When a bank gives a loan to an individual or an institution, the loan will be repaid with interest after a certain period of time.

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Liquidity crisis cause call money,In reality for various reasons. After a certain period of time, the borrower fails to repay the loan. These overdue loans become defaulted loans at one time.

The defaulted loan then becomes unprofitable but the bank cannot refrain from paying interest on ordinary depositors. The liquidity crisis of the bank occurred due to the actual payment including interest on the deposit.

Banks were then forced to deal with the liquidity crisis by taking loans at high-interest rates from the call money market. For example, the Hallmark scandal has affected the liquidity of Sonali Bank in bd, resulting in a high rate of borrowing from the call money market every day.

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