Bangladesh Bank steps in to boost money flow amid coronavirus outbreak

  • Senior Correspondent,
    Published: 2020-03-23 20:55:59 BdST

Bangladesh Bank has cut the repo rate to 5.75 percent from 6 percent in an effort to boost liquidity amid a coronavirus pandemic.

The central bank announced the decision in a notice on Monday as fears of the coronavirus spread deepened with six new cases.

The repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. A repo rate cut is an incentive for banks to borrow funds from the central bank.

The reverse repo rate will remain unchanged at 4.75 percent.

Bangladesh Bank also reduced the cash reserve requirement, or CRR, for all banks to 5 percent from 5.5 percent, effective from Apr 1. CRR is a tool to increase or decrease money supply. Reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals.

The scheduled banks are currently required to maintain CRR at 5.5 percent with the Bangladesh Bank on a bi-weekly average basis with a provision of minimum 5 percent on a daily basis. The ratio has been reset at 5 percent on a bi-weekly average basis with a provision of minimum 4.5 percent on a daily basis.

Both the repo rate cut and the CRR reduction are the first since April 2018.