Before this circular, there was no separate directive for banks with regard to maintaining CRR and SLR for offshore banking operation
The Bangladesh Bank (BB) has asked all scheduled banks to maintain cash reserve ratio (CRR) and statutory liquidity reserve (SLR) for liabilities arising from respective offshore banking operations.
It also asked the banks to comply with this directive effective from September 1, 2019, said a circular issued from the central bank's department of offsite supervision (DOS) on Monday.
Before this circular, there was no separate directive for banks with regard to maintaining CRR and SLR for offshore banking operation (OBO), said Md Rezaul Islam, General Manager, Department of Off-site Supervision, adding that the previous directives covered banks' local operation.
"Banks will be benefitted more by complying to this directive," Islam said.
According to the DOS circular, CRR and SLR for offshore banking operations will cover liabilities relating to customer deposit, borrowing from banks (outside Bangladesh), deposit from banks (outside Bangladesh), deposit from financial institutions (outside Bangladesh), borrowing from financial institutions (outside Bangladesh) and other payable liabilities (excluding domestic intra-bank and interbank OBO to OBO transactions).
In banking system, CRR is a proportion of cash determined by the central bank from time to time against a bank's total demand and time liabilities (TDTL). CRR ensures flow of money to the economy.
According to BB order, the current provision of CRR requirement for each of the banks is 5.5% of respective TDTL.
At present, banks are allowed to maintain CRR with local currency (taka) only. The day-end balances of the current accounts maintained with different offices of BB will be aggregated to calculate the maintained CRR of the day.
Meanwhile, every scheduled bank has to maintain assets in cash or gold or in the form of un-encumbered approved securities against total demand and time liabilities called SLR. This instrument (SLR) ensures the solvency of a bank. The BB issues notification from time to time with regard to required provision of SLR based on the status of the financial sector.
At present, the required SLR is 13% daily for conventional banks and 5.5% daily for Islamic Shari'ah-based banks.
In its latest directive, the central bank said banks might use foreign currency (equivalent to BDT at the rate published by BB) from foreign currency clearing account maintained with BB for CRR (only to fulfill the requirement against OBO) and SLR purposes as long as there is credit balance in the account.
In this case, no interest will be paid on the used portion of foreign currency to maintain CRR and SLR, the BB circular notes.