The central bank yesterday refuted rumours on slashing the cash reserve ratio (CRR), which is the amount of cash that banks have to hold in reserve.

“It will be considered only after the inflation rate comes down to 7-8 percent,” Dr Atiur Rahman, the central bank governor, told reporters at the launch of the monetary policy statement for January-June.

It was rumoured in the money and capital markets that Bangladesh Bank would reduce the CRR by 50 basis points to 5.5 percent after India's central bank did so on Wednesday. The stockmarket bounced back on that day.

If the CRR is reduced by 50 basis points, nearly Tk 2,000 crore will come into the cash-strapped banking industry, according to the central bank.
But inflationary pressure troubles BB.

The point-to-point inflation came down to 10.63 percent in December from nearly 12 percent in September, mainly due to a decline in food prices.

“However the fact that non-food inflation is still steadily increasing suggests that the focus on bringing inflation to a single digit needs to continue,” Rahman said.

Tight liquidity forced banks to collect deposits at up to a 15 percent rate to maintain the loan-deposit ratio within 85 percent. But banks lent more than the regulatory limit and are now trying to match it by increasing deposits.

The Daily Star/Bangladesh/ 27th Jan 2012