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PCBs to get half of state entities’ deposits

Muhith asks BAB to settle other issues sitting with BB governor

FE Report | March 31, 2018 00:00:00

State enterprises will now be allowed to deposit 50 per cent of their funds with the private commercial banks (PCBs), up from the 25 per cent cap they used to have earlier.

The decision to raise the share of PCBs came during a meeting of Finance Minister AMA Muhith with the banking industry leaders in the capital on Friday.

"From now on, private banks will be able to get 50 per cent of the government funds instead of 25 per cent", Chairman of Bangladesh Association of Banks (BAB) Md. Nazrul Islam Mazumder told the media after the meeting.

As per the existing the guideline, more than 25 per cent of the government funds cannot be deposited with the private banks.

However, private bankers for long have been demanding an increase in the share to meet the growing demand for liquidity in the banking sector.

In Friday's meeting, representatives from Bangladesh Association of Banks formally requested the Finance Minister to increase the share to 50 per cent, to which, Muhith agreed.

"We thank the Finance Minister for this decision. This will go a long way in addressing the liquidity crunch of the private banks and to foster investment in the country", the BAB Chairman said.

During the meeting, the private bank leaders also requested the Finance Minister to reduce the Cash Reserve Requirement (CRR) by 3 per cent. They also wanted to bring the interest rate on loan to single digit.

Noting that currently a large amount of money is sitting idle as CRR Mazumder said, "Reducing the CRR by 3 per cent would save around Tk. 300 billion of that idle money".

However, there was no conclusive decision in this regard during the meeting.

Banking industry leaders informed that they will hold another meeting with the Bangladesh Bank Governor on Sunday to resolve other issues.

Speaking on the occasion, Finance Minister AMA Muhith said that the government will not take any decision this year which can hurt the economic growth.

"Our target is to reach 7.5 per cent economic growth this fiscal year and 7.8 per cent growth in the next fiscal year", Muhith said.

He also asked the BAB leaders to resolve other issue with the central bank governor.

"Bangladesh Bank Governor is the regulator of the banking sector. You should resolve other issues with him", he said.

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