CRR Drops 100 Basis Points for NBFIs

To order to ease the liquidity burden on non-bank financial institutions (NBFIs) during the Covid-19 pandemic, Bangladesh Bank has turned down the CRR by 100 basis points to 1.5 percent.

At the same time, the statutory liquidity ratio (SLR) has been increased from 2.5 percent to 3.5 percent. 

The Financial Institution and Market Department of the Bangladesh Bank released a circular in this respect on Sunday.

With this decision, NBFIs will get back around Tk350 crore from their CRR kept with the central bank, Mominul Islam, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) and managing director of IPDC Finance, told media.

However, as the SLR has been increased, NBFIs will have to invest the amount in securities and bonds. At the end of the day, the decrease in the CRR will yield no benefit, the sector leader also said.

"Nonetheless, there is a gain that we will receive some value from the enhanced SLR," said Momimul.

Banks and NBFIs have to maintain CRR and SLR with the central bank to protect the interest of the depositors.

The NBFIs are allowed to mobilise term deposits only. According to Bangladesh Bank's latest instruction, term liabilities are subject to an SLR of five percent, including average 1.5-percent CRR on a bi-weekly basis. But at least one percent CRR has to be maintained each day.

The decision has been in effect since 1 June of this year and the facility will continue until further notice by the Central Bank.

At the end of December 2019, the liquidity-based CAMEL ranking matrix put four NBFIs out of a total of 33 in the green or strong zone, 19 in the yellow or satisfactory zone and 10 in the red or weak zone.

Previously, Bangladesh Bank reduced the CRR for banks twice to four per cent from 5.5 per cent, allowing them to get back around Tk20,000 crore cash from the central bank.