Central bank should have cut CRR, repo rate earlier

The Bangladesh Bank should have cut the cash reserve ratio (CRR) and repo rate earlier, said former governor of the central bank Dr Salehuddin Ahmed.

Finally, it has reduced the cash reserve ratio to 4 percent and the repo rate slightly over 5 percent, he said.

"It is better late than never," said Dr Salehuddin.

"Addressing the banking sector's chronic inefficiency and weaknesses is a big challenge for proper utilisation of this money. Otherwise, more money to banks can shoot up default loans further," he observed.

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.