I oppose such a big cut in CRR
The Bangladesh Bank's monetary policy committee at an emergency teleconference meeting on Wednesday cut the CRR by 100 basis points to 4 percent
Ahsan H Mansur, executive director, Policy Research Institute, Bangladesh said he opposed such a big cut in the cash reserve ratio (CRR) "as it will hurt depositors' interest".
The repo rate, at which the Bangladesh Bank lends money to commercial banks, needs to be reduced further instead of a big cut in the CRR, he told The Business Standard.
"I think the way the Bangladesh Bank is increasing liquidity into the market will not work. I doubt how banks will lend, especially to small and medium enterprises, at only 3 percentage points spread," said Ahsan H Mansur.
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"The government is giving subsidies on interests only. But it could have provided risk guarantee, at least partially if not fully. Many countries in the world provide this type of risk guarantee to banks," he added.
The Bangladesh Bank's monetary policy committee at an emergency teleconference meeting on Wednesday cut the CRR by 100 basis points to 4 percent, releasing around Tk13,000 crore fresh liquidity in the banking system.
In another move, the central bank slashed the repo rate by 50 bps to 5.25 percent, making money cheaper for banks.
This is the second time in two weeks that the central bank slashed the repo rate and CRR. On March 23, it cut the repo rate by 25 bps and the CRR 50 bps.
