Dhaka, Bangladesh (BBN) – The overall excess liquidity in the banking system increased by nearly 11 per cent in April as the central bank slashed the cash reserve requirement (CRR).

The excess liquidity with the banks rose to around BDT 805 billion in April 2018 from BDT 727 billion a month before, according to the officials of the Bangladesh Bank (BB).

The major portion of the excess liquidity has already been invested in the government-approved securities and the BB bills as risk-free investments for the banks, they added.

Talking to the BBN, a BB senior official said some banks, including the public ones, are now holding excess liquidity after the BB revised the CRR rules.

The banks were able to use BDT 103 billion additional fund since April 15 this calendar year after implementation of the revised CRR rules, he explained.

Under the revised rules, the banks are now maintaining 5.50 per cent CRR with the BB, instead of the previous 6.50 per cent, from their total demand and time liabilities on a bi-weekly basis.

On the other hand, excess reserve, generally known as excess over daily minimum CRR with the BB, also rose to BDT 48 billion in April from BDT 32 billion in March.

The central bank’s selling of the US dollar has contributed to help the commercial banks reduce their excess liquidity, according to another BB official.

He also said the excess liquidity with the banks could have been BDT 1.0 trillion, if the banks had not purchased the US dollar from the BB to settle their import payment obligations.

Around BDT 190 billion entered into the BB’s vault in exchange of US$ 2.31 billion, sold by the central bank to the banks from July 01 to June 12, the central bank data showed.

The BB has resumed giving the support through selling the US currency to the banks directly to keep the foreign exchange market stable in recent months.