Bangladesh Finance Minister AMA Muhith. BBN file photo

Dhaka, Bangladesh (BBN) – Cash Reserve Requirement (CRR) will be slashed by 1 percent from the existing 6.50 percent to help solving the ongoing liquidity crunch in the banking system of Bangladesh.

The decision was taken at a tripartite meeting among the Ministry of Finance, Bangladesh Bank and Bangladesh Association of Banks (BAB) held at a local hotel in Dhaka on Sunday.

“The CRR will be cut by 1 percent to improve the liquidity situation that also help bringing the interest rate on lending at single digit from the existing level,” Finance Minister AMA Muhith told reporters after the meeting.

Earlier on Friday, the private bank leaders requested the finance minister to reduce the CRR by 3.0 percent.

They also wanted to bring the interest rate on loan to single digit.

The private bank leaders made the appeal during a closed-door meeting between the members of BAB and the finance minister.

The CRR cut measure will help banks to get an additional BDT 300 billion in liquidity, said Nazrul Islam Mazumder, chairman of the BAB, during the meeting.

“A huge amount of fund is now stuck in the central bank in the form of cash reserve requirement. The fund cannot be invested and it does not play any role in containing inflation,” Mazumder said.

The interest rate on lending will come down to a single digit again if the central bank cuts the CRR, he added.

As per the Friday’s decision, today’s tripartite meeting was held.