The country's top bankers proposed Wednesday lowering the ratio of both statutory liquidity ratio (SLR) and cash reserve requirement (CRR) by 2.0 percentage points each to improve liquidity situation in the banking sector.
They made the proposal at a meeting held in Dhaka with Bangladesh Bank (BB) Governor Salehuddin Ahmed in the chair.
The central bank asked the bankers to avoid media campaign to attract deposits through offering higher rates and improve the fund management in their respective banks.
"We have advised the commercial banks to avoid interest rate-hike campaign for collection of deposits," the BB Governor Salehuddin Ahmed told reporters after the meeting, held at the central bank.
He also said the central bank directed the bankers to handle assets and liabilities management effectively to avoid any volatility in the market.
Sources, however, said the central bank asked the bankers to keep interest rates at a rational level to facilitate the country's business activities.
"We have proposed to the central bank to lower the ratios of SLR and CRR immediately to help improve liquidity situation in the banking sector," Chairman of the Association of Bankers Bangladesh (ABB) and Managing Director of the National Bank Limited (NBL) M Aminuzzaman told the FE.
Currently, banks are maintaining 18 per cent SLR along with 5.0 per cent CRR with the central bank against their total deposits on a bi-weekly basis.
In October 01, 2005, the BB raised the percentage of SLR by 2.0 per cent to 18 per cent from 16 per cent.
Besides, the central bank also increased the CRR by 0.5 percentage point to 5.0 per cent from the earlier 4.50 per cent of total deposits of the commercial banks on a bi-weekly basis.
The central bank took the measures to curb inflationary trend through tightening the flow of liquidity in the market.
The meeting also discussed various issues including inter-bank foreign exchange market situation within a view to bringing uniformity, instead of the existing duel exchange rates, that ultimately give wrong signals about the market.
Under the dual exchange rates, one exchange rate for export-import business and remittances is fixed by the nationalised commercial banks (NCBs), which is lower than the other one set by the private commercial banks (PCBs) and the foreign commercial banks (FCBs).
At the same meeting, the bankers identified at least three causes -- liquidity problem of the NCBs, increasing rates of return on saving certificates and withdrawing fresh fund from the market by the central bank using its reverse repurchase agreement (repo) tool -- for the prevailing liquidity situation.
The bankers said that the situation would deteriorate further if the central bank does not take proper initiatives to address the existing problems.
"We are afraid of the country's overall business activities being hampered in the absence of immediate steps coming from the central bank to improve the situation," a banker told the FE.