DHAKA, Nov 7: The Bangladesh Bank has lowered the bank rate from 6 per cent to 5 per cent with immediate effect in order to encourage commercial banks to reduce interest rates and to increase credit flow in the economy.

The central bank has also brought down the statutory liquidity ratio (SLR) to 16 per cent from 20 per cent to further fatten the banks’ liquidity, increasing their lending capacity. The decision will be effective from Saturday.

The twin measures followed the recent interest-rate cuts by the commercial banks in conformity with Bangladesh Bank’s directive, while the banks were conveyed the rate-cut decisions through a central bank circular issued on late Thursday.

In view of excessive rates of interest, which entrepreneurs describe as “too high” to make ventures viable, the central bank felt that it is obligatory to reduce interest rates to increase competitiveness in a global context.

Interest rates in Bangladesh are much higher than those in some neighbouring countries.

The two latest measures are part of a set of central bank measures that were taken earlier to widen loan disbursement with reduced interest rates for different kinds of ventures aimed at alleviating poverty and achieving growth, according to a Bangladesh Bank press release.