Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has asked the commercial banks to maintain statutory reserve separately under the new procedure from February 1.
The statutory reserve consists of two components – cash reserve requirement (CRR) and statutory liquidity ratio (SLR).

Bangladesh Bank (BB) issued a master circular in this connection on Sunday and asked the chief executives of all scheduled banks to comply with the new procedure of the CRR and the SLR from the stipulated timeframe.

“We’ve separated CRR from SLR in line with the Banking Companies (Amended) Act, 2013, aiming to implement monetary policy effectively,” a BB senior official said without elaborating.

Currently, the required CRR is 6.0 per cent on bi-weekly average basis of the average total demand and time liabilities (ATDTL) with a provision of minimum 5.5 per cent on daily basis of the same ATDTL.

At present, banks are allowed to maintain cash reserve with local currency (Bangladesh Taka) only. The day-end balances of the (BDT) current accounts maintained with different offices of BB will be aggregated to compute the maintained cash reserve of the day.

“The balance so maintained shall be un-encumbered in all aspects. The encumbered (lien against discounting facility, etc. and capital lien in case of foreign banks) portion of the balance will be deducted while computing both the maintained amount and excess of cash reserve,” the BB said in its 11-page circular.

Every scheduled bank has to maintain assets in cash or gold or in the form of un-encumbered approved securities, the market value of which shall not be less than such portion of its total demand and time liabilities as prescribed by the central bank from time to time.

At present, the required SLR is 13 percent daily for conventional banks and 5.5 percent daily for Islamic Shari’ah-based banks and Islamic Shari’ah-based banking of conventional banks of their average total demand and time liabilities.

The eligible components for maintaining statutory liquidity reserve are cash in tills (both local and foreign currency), gold, daily excess reserve (excess of cash reserve) maintained with the central bank, balance maintained with the agent bank of BB and un-encumbered approved securities as defined in the existing Banking Companies Act, according to the circular.

“Banks will take utmost care while reporting the use of foreign currency in their statements as any misreporting regarding the amount of foreign currency used for SLR purpose will attract a penalty two times the amount of interest already credited for the misreported amount along with reversal of the interest credited,” another BB official said while replying to a query relating to use of foreign currency from foreign currency clearing account for SLR purpose.

For the purpose of maintenance of CRR and SLR, demand and time liabilities will include all on-balance sheet liabilities excluding paid-up capital and reserves; loans taken from BB; credit balance in profit and loss account; inter-bank items; Repo, Special Repo and any kind of liquidity support taken from the central bank, he added.
He also said the maximum limit of holding approved securities under held to maturity (HTM) portfolio has been re-fixed at 110 percent of SLR for all non-primary dealer banks while 125 percent of SLR for all primary dealer banks.

“The banks will have to submit the monthly statements of maintenance of the CRR and the SLR in the newly prescribed formats to the Department of Off-site Supervision (DOS) within the 10th of the following month,” he noted.

Penal interest (bank rate plus 5.0 per cent) and penalty will be charged according to the instructions of Bangladesh Bank Order, 1972 and the DOS directive for CRR-related issues, the circular said.

On the other hand, penalty will be charged at the prevailing special Repo rate on the amount by which the SLR falls short daily.

BBN/SSR/AD-20Jan14-10:20 am (BST)