BB cuts dollars reserve ratio for non-banks
The central bank yesterday slice the cash reserve ratio (CRR) for non-bank finance institutions (NBFIs) so as to help the cash-strapped entities tackle the ongoing monetary fallout due to the coronavirus pandemic.
The regulator of the banking sector reduced NBFIs' CRR by 100 basis points to 1 1.50 %, a move that could free up Tk 305 crore for them, explained a central bank official.
The CRR determines the part of customer deposits that professional banking institutions must keep as a reserve with Bangladesh Bank.
NBFIs will have to maintain in least 1.5 % as CRR on a weekly basis and the ratio won't decline below 1 % under any circumstances.
However the banking watchdog has not revised a 5 % statutory liquidity ratio (SLR) that NBFIs had before maintained. CRR is an integral part of SLR.
Banks and NBFIs need to invest a portion of their depositors' fund found in the treasury-bills and bonds to keep up SLR. This implies NBFIs must invest 3.50 per cent of their depositors' fund in the government securities against the previous ceiling of 2.50 per cent.
But, the NBFIs, which usually do not take all term deposit, might be permitted to maintain the portion of SLR. They have to keep 2.50 per cent as SLR in the central bank.
There are 35 NBFIs in the united states of which 5 usually do not mobilise term deposit.
The unrevised SLR will not put any adverse effect on NBFIs as most them have invested their fund in the federal government securities surpassing the required limit.
The central bank has recently reduced banks' CRR by 150 basis points to 4 %, a move which has injected a lot more than Tk 19,000 crore into the economy.
That is a welcome move as it can help NBFIs address the ongoing financial meltdown, said Mominul Islam, chairman of the Bangladesh Leasing and BOAT LOAN COMPANIES Association (BLFCA), an organisation of managing directors of NBFIs.
"We've frequently requested the central lender to take action," he explained, adding that the BLFCA experienced called for reducing the complete SLR.
The organisation will meet the central lender officials within this week where it'll raise more other issues to tackle the meltdown, said Islam, also managing director of IPDC Finance.
The central bank is focusing on forming a refinance scheme of Tk 10,000 crore for NBFIs.
"We may also discuss the problem with the governor," Islam said.
