Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has moved to separate the cash reserve requirement (CRR) from the statutory liquidity ratio (SLR) aiming to implement its monetary policy effectively, officials said.

The Bangladesh Bank (BB) will issue a directive in this connection shortly asking the banks to maintain the CRR and the SLR separately in a new prescribed format.

“We’re working on the issue,” a senior BB official said, adding that the central bank would issue the directive under the Bank Company (Amended) Act 2013.

The law empowers the central bank to do the needful for maintenance of the CRR and SLR separately, according to the BB officials.

Currently the conventional banks are maintaining with the BB the SLR at 19 percent, including the CRR.

The banks are also allowed to maintain the CRR at 5.50 percent on the daily basis, but the bi-weekly average has to be 6.0 percent.

Currently the banks maintain the CRR in the local currency only. The day-end balance of the account maintained with the central bank in the Bangladesh Taka (BDT) is considered the CRR.

On the other hand, the Shariah-based Islamic banks maintain 11.50 percent SLR including the CRR, as they cannot purchase any bonds and government-approved securities that involve receipt of interest.

However, the Islamic banks and financial institutions may now meet their SLR through Islamic bonds as per the Islamic Bond Regulation 2004.

The banks are allowed to maintain the SLR in the form of assets in cash or gold or in the form of un-encumbered approved securities, the market value of which shall not be less than the 19 per cent fixed by the BB.

Three specialized banks have continued to remain exempt from maintaining the SLR.

BBN/SSR/AD-26Oct13-1:27 pm (BST)