In a move to ease liquidity constraints, Bangladesh Bank has lowered the cash reserve ratio (CRR) requirement for banks, allowing them to hold less cash in reserves and increasing their lending capacity.
With deposit growth slowing to 7.44% and the central bank halting daily lending, Bangladesh Bank has adjusted the CRR to provide banks with more investable funds. Effective from Wednesday, banks will now be required to maintain a daily CRR of 3%, down from the previous 3.5%. However, the bi-weekly average reserve requirement will remain at 4%.
The decision follows recommendations from the International Monetary Fund (IMF) to modernize Bangladesh’s monetary policy framework. A central bank official stated that banks will no longer be able to borrow on a daily basis and will soon lose access to 14-day and 28-day borrowing facilities.
Bangladesh Bank’s directive noted that all scheduled banks, including Shariah-based banks, must comply with the new CRR structure, which aims to strengthen liquidity management. The revised CRR will take effect on March 5.
Liberty News’ economic correspondent states that the central bank has announced plans to phase out the 28-day repo facility by mid-March and the 14-day repo in June. Moving forward, banks will only be able to borrow from the central bank once a week, on Tuesdays, at the policy interest rate.
LND/BG
