The interbank lending market is a financial market where banks lend to each other on a short-term basis — typically overnight or for a few days.
Banks' daily cash flows are uneven. Banks with excess cash lend to banks with shortfalls. The interest rate on these loans is called the interbank rate.
This market is critical for financial system stability. It helps banks manage liquidity and serves as a key channel for central bank monetary policy transmission.
In Bangladesh, there is an active interbank lending market, known as the call money market. Bangladesh Bank monitors its interest rates to assess monetary policy effectiveness.