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  • Last Update : 04:24 pm

Coronavirus: Further cut in repo rate, CRR to boost banks’ liquidity

  • Published at 06:41 pm April 9th, 2020
File photo of the main entrance of Bangladesh Bank in Motijheel, Dhaka Mahmud Hossain Opu/Dhaka Tribune

The move will enhance banks’ lending capacity at cheaper rates to invigorate the economy, say experts

The Bangladesh Bank (BB) has further slashed the repurchase agreement (repo) interest rate and cash reserve requirement (CRR) to boost liquidity in banks in an effort to implement the stimulus packages announced to cushion the coronavirus impact.

On Thursday, it cut the repo rate by 50 basis points from 5.75% to 5.25% and brought down the CRR to 4% from 5%.

The move comes three days after, Prime Minister Sheikh Hasina unveiled a set of bailout packages of Tk 72,750 crore to overcome the possible economic shock from the ongoing shutdown to stem the spread of the coronavirus.

Earlier on March 24, the central bank cut the repo rate from 6% to 5.75% and CRR from 5.50% to 5%, some two weeks after Bangladesh reported its first Covid-19 cases.

The repo interest rate determines the rate of interest a scheduled bank has to pay on a loan from the Bangladesh Bank and the CRR determines the amount of deposit a bank has to keep with the BB as a reserve requirement.

In notifications forwarded to top bank officials on Thursday, the Bangladesh Banks said the new rates will be effective from April 12.

Repo rate determines the rate of interest a bank has to pay on a loan from the Bangladesh Bank and the CRR determines the amount of deposit a bank has to keep with the central banks as a reserve requirement.

The cut in the rate and reserve requirement means banks’ cost of borrowing funds goes down and its liquidity will increase, according to experts. 

“The move will enhance banks’ lending capacity at cheaper interest rates to invigorate the struggling economy caused by the coronavirus outbreak,” a senior banker said, asking not to be named as he was not authorized to speak with the media.

The Covid-19 pandemic has, so far claimed nearly 90,000 lives in more than 200 countries and territories

Bangladesh has so far, reported 21 deaths and confirmed 330 coronavirus cases, with 112 new cases reported on Thursday by far the biggest single-day surge since the first three was reported on March 8.

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