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Bangladesh Bank lowers policy rates further to increase liquidity supply

Staff Correspondent | Published: 20:28, Apr 09,2020

 
 

The Bangladesh Bank on Thursday again reduced the policy rates — cash reserve ratio and Repo rates — aiming to increase money supply in the banking sector and help the government to implement stimulus packages to combat coronavirus fallout.

The central bank on Thursday issued two circulars stating that the reduced policy rates would increase liquidity supply in the market thus help implementing the stimulus packages.

On April 5, the government announced a number of stimulus packages worth Tk 67,750 crore along with the earlier-announced Tk 5,000 crore support for the readymade garment sector, taking the total volume of the stimulus packages to Tk 72,750 crore.

As part of the move, the central bank reduced the mandatory cash reserve ratio to 4 per cent from 5 per cent.

The reduction in the cash reserve ratio came within 20 days of reducing the rate to 5 per cent from 5.5 per cent.

A central bank official said that the reduction of cash reserve ratio by 1.5 percentage points in two phases freed about Tk 18,600 crore in the banking sector.

Besides, the central bank also lowered further the rate of repurchase agreements (Repo) to 5.25 per cent from 5.75 per cent.

In two phases in the past 20 days, the central bank reduced the Repo rate by 0.75 percentage points.

Besides the cash reserve ratio, conventional banks are supposed to keep another 18 per cent of the deposits as SLR while the rate is 10 per cent for the Shariah-based banks.

Cash reserve ratio would come into effect on April 15 and the Repo rate on April 12, the BB circulars said.

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