The Bangladesh Bank on Sunday raised the banks’ advance-deposit ratio (ADR) by 2% to increase credit supply and boost investment in the economy hard hit by the steady and surging coronavirus cases.
The central bank issued a circular in this regard, enhancing the ADR for conventional banks to 87% from 85% and IDR (investment-deposit ratio) for Islamic banks to 92% from 90%.
The directive will be effective from April 15.
Like many other countries of the world, the economic activities of Bangladesh reduced significantly owing to the outbreak of the novel coronavirus, said the BB circular.
In this context, the central bank raised the banks’ lending capacity to mobilize credit flow in the private sector; improve the overall liquidity situation and implement the stimulus package announced by the Prime Minister Sheikh Hasina to tackle adverse effects emerging from the contagious virus on the economy, it also said.
Bankers welcomed the central bank’s latest decision, saying the measure would help implement the bailout package rolled out to shore up battered businesses.
Talking to Dhaka Tribune, Association of Bankers, Bangladesh (ABB) Chairman Ali Reza Iftekhar said the BB’s step was very good initiative. The policy measure would help banks in mobilizing enough credit flow during the virus-related critical period, he added.
Earlier, the central bank took several initiatives to boost liquidity in the banking sector during the pandemic coronavirus.
The BB slashed the repurchase agreement (repo) interest rate to 5.25% from 6% and brought down the banks’ cash reserve requirement (CRR) to 4% from 5.50% to boost liquidity in banks in an effort to implement the stimulus packages announced to cushion the coronavirus impact.
Prime Minister Sheikh Hasina on April 5 announced incentive package of Tk72,750 crore to overcome the economic impact caused by the outbreak of the novel coronavirus. The bailout package will be implemented through the banking channels.
