Bangladesh Bank has given banks a relaxation in maintaining security reserves to increase agricultural and SME loans. As a result, less security reserves will have to be maintained against these loans than before.

The bank has to maintain safety reserves from its operating profit. As a result, this exemption will help banks increase their profits. Bangladesh Bank issued a notification in this regard on Monday.

According to the notification, banks are required to maintain a security reserve of 1 percent and 5 percent respectively against outstanding loans under Standard and Special Mention (SMA). The new decision has been taken to encourage banks to disburse short-term agricultural loans and to disburse loans to cottage, micro and small industry enterprises under the Cottage, Micro, Small and Medium Enterprises (CMSME) sector.

According to this decision, a security deposit of 1 percent will have to be maintained against all unclassified (standard and SMA) short-term agricultural loans and cottage, micro and small (CMS) industrial enterprise loans under the CMSME sector till December 31, 2026.

Representatives of the Association of Bankers Bangladesh (ABB), an organization of top bank executives, raised this demand at a meeting held with Bangladesh Bank in the last week of last month. Bangladesh Bank Governor Ahsan H. Mansur and other senior officials were present at the meeting. Bangladesh Bank then announced the decision on Monday.