Bangladesh Bank has slashed loan-deposit ratio for commercial banks by 1.5% to 83.5% with a view to curbing excessive lending.
The central bank issued a notification on Tuesday, asking the authorities of all commercial banks to reduce the ratio within the new limit by June 30.
According to the notification, advance-to-deposit ratio (ADR) for conventional banks has been fixed at 83.5% instead of the existing 85%, while investment deposit ratio (IDR) for shariah-compliant Islamic banks has been set at 89% instead of the current 90%.
“Bangladesh Bank issued the directive considering the overall capital base of the country’s banking sector, liquidity situation, inter-bank dependency, and also to maintain the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) according to the Basel III framework,” it reads.
“The move is aimed at further improving the mentioned indicators and ensuring growth in line with the overall deposit growth.”