A file photo shows Bangladesh Bank headquarters in Dhaka. Bangladesh Bank on Monday raised the cash reserve requirement by 50 basis points to 6.5 per cent for scheduled banks to curb inflationary pressure on the economy, said officials of the central bank on Monday.

A BB official told New Age that the central bank would mop up around Tk 3,000 crore from the banks by increasing the CRR, also known as cash reserve ratio, as the banks had excess liquidity amid a dull business condition. Under the new rules, the scheduled banks will have to maintain 6.5 per cent CRR with the central bank from their total demand and time liabilities on a bi-weekly basis. The BB issued a circular to managing directors and chief executive officers of all banks in this regard asking them to maintain the new CRR ratio from today (Tuesday). The banks will have to maintain the CRR at 6.0 per cent instead of the existing 5.50 per cent on daily basis, but the bi-weekly CRR will have to be 6.5 per cent, according to the BB circular. The new CRR comes after a gap of more than three years and six months. The central bank last increased the ratio by 0.5 percentage points to 6.0 per cent on December 1, 2010. The central bank, however, unchanged the rate of statutory liquidity ratio (SLR) at 19 per cent. The BB official said that the central bank took the initiative due to increasing trend in excess liquidity in the banks amid sluggish business situation. ‘Besides, the inflationary pressure has recently increased. Due to the central bank move, the inflation may decline in the months to come as the BB will mop up huge amount of money from the market as part of its latest initiative’, he said. The country’s point-to-point inflation in May increased by 0.02 per cent to 7.78 per cent as consumer price index of some food items rose, according to the Bangladesh Bureau of Statistics data. The rate of inflation also increased by 0.32 per cent in May from that of 7.48 per cent in April this year. Due to the excess liquidity, the scheduled banks are now investing Tk 6,500 to Tk 8,000 crore with the BB’s every auction of Reverse Repo, he said. The banks invested Tk 6,927 crore with the rate of interest of 5.25 per cent in the Reverse Repo on June 19, according to the BB data. Economist AB Mirza Azizul Islam, who was a former finance adviser to the caretaker government, told New Age on Monday that the latest CRR policy would not put negative impact on the financial market as excess liquidity in the banking sector maintained an increased trend in the recent period amid sluggish business. The credit demand from the private sector is slow which pushed up the idle money in the banks along with the non-bank financial institutions, he said. Against the backdrop, the new CRR policy will help contain the inflationary pressure, Aziz said. Former BB governor Salehuddin Ahmed said the new CRR policy might slightly discourage the entrepreneurs due to contractionary money supply. The profitability of the banks will decline in the coming months due to the new rule, he said. Salehuddin said, ‘I have not found any solid ground for increasing the CRR right now as the new policy will not bring any major positive impact on the market.’ BRAC Bank managing director Syed Mahbubur Rahman said that the money supply in the market would decline due to the latest CRR initiative by the central bank.

Bangladesh Bank on Tuesday sent a letter to Swiss Financial Intelligence Unit expressing interest to sign a memorandum of understanding on exchanging information about money laundering. The BB took the move in a bid to collect information about money deposited by Bangladeshi citizens with the Swiss banks, said officials of the central bank. The recent data of Swiss National Bank showed that deposits by Bangladeshi citizens at various Swiss banks rose to Tk 3,236 crore (372 million Swiss francs) at the end of 2013, from Tk 1,991 crore in 2012. A BB official told New Age on Tuesday that the central bank earlier requested the Swiss Financial Intelligence to sign a MoU when Bangladesh became a member country of Egmont Group in July 2013, but the SFI was yet to make any response. BB executive director and spokesperson M Mahfuzur Rahman told New Age on Tuesday that the central bank had proposed again that the MoU should be signed between Bangladesh Financial Intelligence Unit of BB and Swiss Financial Intelligence Unit.

Bangladesh Bank has increased the limit of borrowing by an exporter from the Export Development Fund to $15 million from the existing $12 million.
The manufacturing-oriented exporters of the BTMA, BGMEA and BKMEA are eligible to avail the opportunity of the central bank’s special fund.
The BB on Tuesday issued a circular to authorised dealer branches of all scheduled banks in this regard saying that from now on the ADs would be able to finance maximum $15 million to an exporter.
The manufacturing-oriented exporters will get the facility to import raw materials for producing their export items.
A BB official told New Age on Tuesday that the central bank widened the credit limit due to the increasing demand from the exporters.
On April 7, 2014, the central bank increased the size of the EDF by 20 per cent to make it $1.2 billion to meet exporters’ demands.
The EDF began with an initial amount of $100 million in 2005, which gradually increased to $1 billion last year.
The loans are payable by the banks upon receipt of export proceeds within 180 days of the date of disbursement.
Under the EDF, commercial banks will charge exporters the LIBOR (London Interbank Offered Rate) plus 1.5 per cent, meaning, the cost of loans will remain within 2 per cent as the six-month LIBOR rate is 0.35 per cent at present.
LIBOR is the rate banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates.
The BB is following the LIBOR because the loans will be given in foreign currencies.

Mohammed Nurul Amin has recently joined Meghna Bank as managing director and chief executive officer for a three-year term, the bank said in a statement yesterday.
Prior to joining Meghna Bank, Amin served NCC Bank for nine years as managing director and CEO. He started his career as with Janata Bank in 1977 and also worked with National Bank.
He is a former chairman of the Association of Bankers, Bangladesh and Primary Dealers Bangladesh Ltd and a former vice chairman of Bangladesh Foreign Exchange Dealers' Association.