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BB cuts CRR to help non-bank lenders

SIDDIQUE ISLAM | June 22, 2020 00:00:00

The central bank has slashed cash reserve ratio or CRR by 100 basis points to 1.5 per cent from the existing 2.5 per cent for non-banks in a move to help the sector overcome liquidity constraints, amid the pandemic.

Under the new rules, the non-bank financial institutions are required to maintain a minimum of 1.5 per cent CRR with the Bangladesh Bank on a bi-weekly average instead of 2.5 per cent earlier.

The NBFIs will be allowed to maintain the reserves at 1.0 per cent instead of 2.0 per cent on a daily basis, according to a notice issued by the Bangladesh Bank on Sunday.

The new CRR requirement will take effect from June 01, 2020.

"We've slashed the CRR for the NBFIs, considering the Covid-19 pandemic," a BB senior official told the FE.

It will also help the NBFIs to get access to more than Tk 3.0 billion as lendable fund, the central banker added.

"The NBFIs may use additional funds for the implementation of the government announced stimulus packages," he noted.

Prime Minister Sheikh Hasina has so far announced a total of 19 economic relief packages worth Tk 1.03 trillion to offset the shock of the coronavirus pandemic on various sectors of the country.

The packages, which are equivalent to 3.7 per cent of the country's gross domestic product, will be implemented under the supervision of the central bank and the ministry of finance.

Lobby group the Bangladesh Leasing and Finance Companies Association or BLFCA welcomed the central bank's latest step, saying it will help the sector meet its fund requirements.

"We're very grateful to the central bank for slashing the CRR requirements for the NBFIs," Mominul Islam, chairman of the BLFCA, told the FE.

The BLFCA, a forum of managing directors and chief executive officers of the NBFIs, has sought Tk 100 billion as liquidity support from the central bank to run their operations smoothly, according to Mr. Islam, also managing director and chief executive officer of the IPDC Finance Limited.

"We're trying to meet the BB governor to present our case shortly," the BLFCA chief added.

About slashing the CRR, Abu Zafore Md. Saleh, second vice chairman of the BLFCA, said it is a big relief for the sector in these challenging times.

Meanwhile, statutory liquidity ratio for deposit-recipient and non-deposit recipient NBFIs has been kept unchanged at 5.0 per cent and 2.5 per cent respectively.

Currently, 34 NBFIs are running their business across the country.

In June last, the central bank issued a licence to Strategic Finance and Investments Limited for running their business as an NBFI.

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