Staff Correspondent:

The Bangladesh Bank has reduced the cash reserve ratio (CRR) to 3%, effective from on Wednesday in response to slowing deposit growth.

Deposit growth in Bangladesh’s banking sector has declined to 7.44%, while the central bank has halted its daily lending operations. In light of this, Bangladesh Bank has decided to adjust the CRR requirement against deposits.

Previously, banks were required to maintain 3.5% of their deposits as CRR on a daily basis.

However, effective from Wednesday, this requirement will be reduced to 3%. Consequently, banks will have slightly more investable funds. Bangladesh Bank issued a notification regarding this decision on Tuesday.

A senior official from the central bank stated that the International Monetary Fund (IMF) has recommended modernising the monetary policy framework concerning lending.

This decision aligns with that recommendation. Currently, banks are no longer allowed to borrow money from Bangladesh Bank on a daily basis.

Additionally, 14-day and 28-day borrowing facilities will be discontinued. As a result, the deposit structure will revert to a two-week deposit system, as it was previously.

According to the central bank’s notification, all scheduled banks in Bangladesh, including those operating under Islamic Shariah principles, are required to maintain a minimum of 4% of their total demand and term deposits in cash with Bangladesh Bank on a two-week average basis and a minimum of 3.5% on a daily basis.

This decision has been taken to further streamline liquidity management. The revised rate will be effective from 5 March. Under the new rules, the cash deposit reserve rate will be at least 3% on a daily basis and will remain unchanged at 4% on a two-week average basis.

Bangladesh Bank had earlier announced plans to discontinue the 28-day repo facility by the third week of March, followed by the closure of the 14-day repo facility in June.

As a result, banks will be able to borrow funds from the central bank only once a week—on Tuesdays—at the policy interest rate.