The Bangladesh Bank (BB) on Monday slashed repurchase agreement (repo) interest rate from 6% to 5.75% and cut banks’ cash reserve requirement (CRR) from 5.50% to 5% in an effort to boost banks’ liquidity during the coronavirus pandemic.
The monetary measures of the central bank would ensure banks to get loans from the central bank at lower rate, and boost their liquidity for cut in CRR, experts said.
“The latest actions from the central bank will enhance banks’ lending capacity at cheaper interest rates to invigorate the struggling economy caused by the coronavirus outbreak,” a senior investment banker said.
The central bank issued separate circulars to the managing directors and CEOs of all scheduled banks in the country in this regard.
Before issuing the circulars, monetary policy committee of the Bangladesh Bank took the decision at its 46th meeting held at the BB headquarter on the day. BB Governor Fazle Kabir presided over the meeting.
The new repo rate will be implemented from Tuesday, while the revised CRR rate from April 1, says the circulars.
The repo interest rate determines the rate of interest a scheduled bank has to pay on a loan from the Bangladesh Bank and the CRR determines the amount of deposit a bank has to keep with the BB as a reserve requirement.
“This is a good decision taken by the central bank. It will have a positive impact on the money market,” Syed Mahbubur Rahman, managing director of Mutual Trust Bank told Dhaka Tribune.