DHAKA: The central bank revealed its plans in its Monetary Policy Statement for the second half of the fiscal year ending Jun. 30, at its headquarters on Monday afternoon. Governor Fazle Kabir said a new directive was on its way for banks to bring down the advance to deposit ratio that measures loans as percentage of deposits. The central bank will increase surveillance on the use of bank loans and discourage lenders from ‘undue’ long-term exposure to corporate borrowers. Bangladesh Bank kept repo and reverse repo policy interest rates unchanged at 6.75 percent and 4.75 percent respectively. The central bank last reduced both rates by 50 basis points in January 2016.
The BB plans to introduce “intensive and intrusive” supervision on credit flows in order to moderate the imbalance from high import growth and shift to a more ‘sustainable’ trend. It will also encourage banks to mobilise the foreign savings of non-resident Bangladeshis to invest in the government’s Wage Earners’ Development Bonds and attract portfolio investment from the group through Non-resident Investment Taka Accounts. According to its statement, the central bank is hopeful of the long-awaited pickup in investment and output activity due to increases in indicators such as imports and private sector credit. It also noted that the most substantial increases in imports, aside from the import of food grains due to flood loss, occurred in capital machinery and production inputs. The depreciation of the taka against the dollar and the depreciation of the dollar against other major currencies have improved Bangladesh’s export competitiveness and the inflow of worker remittances, the central bank said. Steps to prevent illegal hundis are also having an effect on remittance inflows.
