Bangladesh Bank (BB) on Tuesday reduced the limit of the Advance Deposit Ratio (ADR) of banks for avoiding their aggressive lending and ensuring quality investments for the country's development.
The BB has fixed the ADR limit to 89 per cent for the Shariah based Islami banks and Islami banking wing of the conventional banks from 90 per cent while 83.50 per cent for conventional banks from 85 per cent, according to a BB circular.
The BB circular said the banks, which existing ADR is over the new limit, will have to bring down in the new limit within June 2018.
For this, banks will have to place an action plan before BB's Department of Off-site Supervision within February 2018, the circular also said.
The central bank issued the circular after announcing its Monetary Policy Statement (MPS) for the second half (H2) of the financial year 2017-18 on Monday.
In the MPS, BB hinted to issue a new directive for banks to rationalize their ADR limit to curb their over-exuberance in lending.BSS