The central Bank of Bangladesh. BBN file photo

Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has slashed on Tuesday the cash reserve requirement (CRR) by 1.0 percentage point to 5.50 per cent after nearly four years, officials said.

Under the revised rules, the banks will have to maintain 5.50 per cent CRR with the Bangladesh Bank (BB) from their total demand and time liabilities on a bi-weekly basis.

The banks will be allowed to maintain the reserve at 5.00 per cent instead of the existing 6.00 per cent on a daily basis, but the bi-weekly average has to be 5.50 per cent at the end.

The new CRR will come into effect from April 15, according to a notification, issued by the central bank on Tuesday.

The central bank also cut the interest rate on repurchase agreement (repo) by 75 basis points on the same day, they added.
According to the latest decision, the existing repo interest rate of the central bank will come down to 6.00 per cent from the existing level of 6.75 per cent while the reverse repo rate will remain unchanged at 4.75 per cent.

The revised interest rate on repo will come into effect from April 15, the notification added.

The new CRR comes after a gap of nearly four years. The central bank last increased the CRR by 50 basis points to 6.50 per cent on June 23, 2014 to curb inflationary pressures on the economy.

Talking to the BBN, a BB senior official said the banks will be able to use BDT 101 billion as loan-able fund after implementation of the revised CRR rule. “The overall money supply may increase slightly following utilisation of the additional fund.”

These decisions were taken at a tripartite meeting of the Ministry of Finance, the BB and the Bangladesh Association of Banks (BAB) in the capital on Sunday to help mitigate the present liquidity shortage in the banking system.