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The central bank has slashed cash reserve ratio (CRR) by 200 basis points to 2.0 per cent only from existing level of 4.0 per cent for the offshore banking operation (OBO) in Bangladesh.
Under the new rules, the banks are required to maintain a minimum of 2.0 per cent CRR with the Bangladesh Bank (BB) on bi-weekly average basis and daily minimum 1.5 per cent of the average total demand and time liabilities (ATDTL) of the OBO, according to a notification issued by the central bank on Thursday.
The new CRR requirement rules for the OBO will be effective from July 01, 2020.
"We've revised the CRR requirement to facilitate liquidity management in the offshore banking operation of Bangladesh," a BB senior official told the FE.
He said the central bank has taken the latest measures for the OBO considering overall liquidity management in the country's banking system.
For the maintenance of statutory liquidity reserve (SLR) of the OBO, “total demand and time liabilities of the banksshall include the liability of such operation, the notification added.
"For the maintenance of CRR and SLR that entails to offshore banking, banks may use funds from offshore banking operation and convert to the Bangladesh Taka (BDT),if required," the BB explained in the notification.
Currently, the banks are mandatorily maintaininga 4.0 per cent CRRwith the central bank from their total demand and time liabilities on a bi-weekly basis.
Senior bankers welcomed the BB's latest move, saying that it will help expandoffshore banking business in Bangladesh.
"It'll help bettermanage liquidity," Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, told the FE.
Association of Bankers, Bangladesh (ABB)had earlier appealed to the central bank to exempt the banks from complying with the CRR and SLR rules for their offshore banking operations.
The central bank had asked the banks to comply with the CRR and SLR rules for their OBOs through issuing a policy on February 25, 2019.