Macro Analysis /
Bangladesh

Bangladesh: Central bank cuts CRR requirement and repo rate further

  • CRR requirement reduced by 100bps and repo rate by another 50bps

  • Overall 150bps reduction in CRR will bring BDT195bn (USD2.3bn) of fresh liquidity into the economy

  • Reduction of repo rate will encourage commercial banks to borrow more from the central bank

Shopnil Paul
Shopnil Paul

Research Associate

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IDLC Securities
9 April 2020
Published byIDLC Securities

The Bangladesh Bank continues its effort to increase money market liquidity, as part of implementing the government’s stimulus plan of BDT727.5bn to address the potential economic impact of Covid-19. Today, the central bank reduced CRR requirement by 100bps and the repo rate by another 50bps. This is the second time in two weeks that the central bank has slashed the minimum CRR and the repo rate. Earlier on March 23, it cut the CRR by 50 bps and the repo rate by 25 bps. Inclusive of all the recent changes, the CRR has reduced by 150bps from 5.5% and the repo rate by 75bps from 6.00%. See also our recent reports Bangladesh government declares policy support for Covid-19 and Bangladesh: Government comes up with stimulus package equivalent to 2.5% of GDP. 

Key highlights:

  • Effective from 15 April, the minimum bi-weekly CRR will be 4.0% whereas the minimum daily CRR will be 3.5%. The 100bps decrease in CRR is expected to increase the money supply in the economy by BDT130bn (USD1.53bn). The overall reduction of 150bps in CRR this year will bring BDT195bn (USD2.3bn) of fresh liquidity into the economy. 
  • Besides, the central bank has re-fixed the repo rate at 5.25% with a reduction of 50bps from the prevailing 5.75%. The re-fixed repo rate will be effective from 12 April for all scheduled banks and financial institutions.