BB to include other banks' deposits for calculating CDR

Siddique Islam

Commercial banks will able to lend more as the central bank has decided to include other banks' deposits for the calculation of credit-deposit ratio (CDR), officials said Monday.

In accordance with the latest decisions, the banks will be allowed to calculate the CDR considering other banks' deposits as a source of fund instead of excluding those deposits from the denominator.

Besides, the banks will have to include credit to other banks in their total credit position. But overnight borrowing and lending will be excluded from the total deposit and credit.

Bangladesh Bank (BB) took the decisions at a meeting with the leaders of the Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) held at its conference room Monday.

Bangladesh Bank Governor Atiur Rahman presided over the meeting, while a nine-member delegation of the associations representing the owners of private commercial banks (PCBs) and their chief executive officers (CEOs) or managing directors led by BAB chairman Nazrul Islam Mazumder took part in it.

"We'll issue a directive in this connection within a day or two," a senior official of the BB told the FE, adding that the central bank has taken the decision aiming to mobilise funds through encouraging intermediation in the banking sector.

"The banks will able to lend more funds in different sectors after issuing the new directive relating to calculation of the CDR," another BB official said.

The banks have to include credit to other banks in their total credit position, he said, adding that overnight borrowing and lending will be excluded from the total deposit and credit

The apex forum of the country's PCBs welcomed the BB's latest move, saying that it would help ease liquidity crunch in the banking system.

"The banks will able to maintain their CDR limit, set by the central bank earlier, easily following the BB's latest decision," Mr. Mazumder told the FE.

On February 20 last, the BB has set June 30 as deadline for bringing down the CDR of the commercial banks to a reasonable level.

Under the directive, 19 conventional commercial banks will have to bring down their CDR to 85 per cent while five Sharia-based Islamic banks to 90 per cent by June 30 this year.

"We've briefed the BB governor of our Saturday meeting's decisions," chairman of ABB K Mahmood Sattar told reporters, adding that the BB has welcomed Saturday meeting's decisions.

On Saturday, the BAB and the ABB decided to follow a uniform policy on deposit rate, indicating a maximum rate of interest at 12 per cent on deposits.

Besides the decision taken on the deposit rate, the meeting resolved to keep the limit on lending rate on import funding for food items at 12 per cent.

The decision came into effect from Monday, the BAB chief added

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