Reverse repo rate cut by 50 basis points

Bangladesh Bank (BB) has lowered the standing deposit facility rate, also known as the reverse repo rate, by 50 basis points to 8 percent, with effect from today.

The banking regulator issued a notice in this regard after its Monetary Policy Committee took the decision in a meeting yesterday. Generally, banks deposit their funds with Bangladesh Bank at the reverse repo rate.

Due to the decline in the rate, banks are likely to increase transactions in the call money market instead of parking their funds with the central bank, a Bangladesh Bank official said.

However, the policy rate, or the overnight repo rate, remained unchanged.

Under the interest rate corridor framework of the monetary policy, the lower bound of the policy interest rate corridor — the standing deposit facility — has been revised downward by 50 basis points, from 8.5 percent to 8 percent, in order to further enhance the dynamism of the interbank money market (call money market) and streamline liquidity management, the notice read.

In addition, the upper bound of the policy interest rate corridor — the standing lending facility — will remain unchanged at 11.5 percent, and the overnight repo policy rate will also remain unchanged at 10 percent.