Dhaka, Bangladesh (BBN)- The central bank raised the cash reserve requirement (CRR) by fifty basis points to 6.50 per cent for the commercial banks on Monday to curb inflationary pressure on the economy.
Under the new rules, the commercial banks will have to maintain 6.50 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis.
The new CRR will be effective from tomorrow (June 24), a senior central bank official said, adding that the central bank has issued a circular in this connection.
"We've increased the CRR to curb inflationary pressure on the economy," SK Sur Chowdhury, deputy governor of the Bangladesh Bank (BB), told BBN in Dhaka.
The country's inflation as measured by consumers' price index (CPI) rose to 7.48 per cent in May 2014, up from 7.46 per cent of the previous month on the point-to-point basis mainly because of increase in prices of food items.
He also said the central bank has taken the latest move considering the country's overall economic situation.
The banks will be allowed to maintain the reserve at 6.00 per cent instead of the existing 5.50 per cent on daily basis, but the bi-weekly average has to be 6.50 per cent in the end, according to the new rules.
"We're hopeful about mopping up over BDT 32 billion excess liquidity from the money market by raising the CRR," the deputy governor explained.
The new CRR comes after a gap of nearly three-and-half year. The central bank last increased the ratio by 0.5 percentage points to 6.0 per cent on December 1, 2010.
BBN/SSR/AD-23JUne14-4:50 pm (BST)
