Bangladesh Bank (BB) has reduced the daily cash reserve requirement (CRR) for banks to enable them to manage liquidity more easily.

The BB said banks will need to keep 3 percent of their time and demand deposits from tomorrow, instead of the previous 3.5 percent, according to a circular issued today.

However, banks will have to maintain 4 percent CRR on a biweekly average basis, as they have been maintaining.

As a result, the investable funds available to banks will slightly increase.

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"This flexibility will have a positive impact. We will see increased efficiency in liquidity management. Excess reserves will go down," said a head of treasury at a private bank.

The cut in CRR, which shows banks have enough cash to meet customer withdrawals, came nearly five years after the central bank reduced the rate.

In April 2020, the BB slashed the daily CRR requirement to 3.5 percent from the previous 4.5 percent, in order to increase the flow of liquidity in the market and implement the stimulus packages by the government at that time to tackle the negative impact of the Covid-19 pandemic.

At that time, the BB brought the biweekly CRR requirement to 4 percent from 5 percent.