In an aim to ease liquidity pressure on Non-Bank Financial Institutions (NBFIs) during the Covid-19 pandemic, the Bangladesh Bank has reduced the cash reserve ratio (CRR) by 100 basis points to 1.5 percent.
At the same time, the statutory liquidity ratio (SLR) for them has been increased to 3.5 percent from 2.5 percent.
On Sunday, the Financial Institution and Market Department of the Bangladesh Bank issued a circular in this regard.
With this decision, NBFIs will get back around Tk350 crore from their CRR kept with the central bank, Mominul Islam, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) and managing director of IPDC Finance, told The Business Standard.
But as the SLR has been increased, NBFIs will have to invest the amount in securities and bonds. Ultimately, the CRR decrease will yield not benefit, the sector leader also said.
"However, there is a benefit that we can earn some interest from the increased SLR," Momimul added.
Banks and NBFIs have to maintain CRR and SLR with the central bank to protect the interest of the depositors.
The NBFIs are allowed to mobilise term deposits only. According to the Bangladesh Bank's latest instruction, term liabilities are subject to an SLR of five percent, including average 1.5-percent CRR on bi-weekly basis. But at least one percent CRR has to be maintained each day.
The decision has been in effect since June 1 this year, and the facilities will continue until further notice by the central bank.
At the end of December 2019, the CAMEL rating matrix in liquidity position placed four NBFIs, out of total 33, in green zone or strong, 19 in yellow zone or satisfactory and 10 in red zone or marginal.
Earlier, the Bangladesh Bank reduced the CRR for banks twice to four percent from 5.5 percent, allowing them to get back around Tk20,000 crore cash from the central bank.