'The decision has been made taking into consideration the overall financial indicators'
The Bangladesh Bank (BB) on Tuesday raised the banks’ advance-deposit ratio (ADR) by 1-1.5 percentage points to increase credit supply and boost investment in the economy.
The central bank in this regard issued a circular enhancing the ADR for conventional banks to 85% from 83.5% and IDR (investment-deposit ratio) for Islamic banks to 90% from 89%.
“The decision has been made taking into consideration the overall financial indicators,” said Bangladesh Bank executive director and spokesman Md Serajul Islam.
Talking to Dhaka Tribune, Bangladesh Bank former governor Salehuddin Ahmed said: “The current investment situation is slowing down. So Bangladesh Bank extended ADR to boost investment.”
“Following the measure of the central bank, aggressive and risky lending is likely to increase,” he added.
Private sector credit growth would increase following the decision, said a senior private banker.
Private sector credit grew by only 11.26% to Tk10,02,966 crore in July this year compared to the same month of last year.
The credit growth fell behind the Bangladesh Bank’s credit growth target of 14.80% set for the current 2019-20 fiscal year.
January 30, 2018, Bangladesh Bank reduced banks’ advance-deposit ratio by 1-1.5 percentage points with a view to containing aggressive and risky lending.