BB to issue notice soon on capping interest rates
The government is not giving up on capping the interest rates on deposits and lending at 6 percent and 9 percent respectively, with Finance Minister AHM Mustafa Kamal yesterday informing the Bangladesh Bank will soon issue a notice on this.
“All banks have to do it,” Kamal told reporters after a meeting with private banks’ chairmen, managing directors and central bank officials at the Bangladesh Bank (BB) headquarters.
Asked when the central bank would issue the notice, he said it would be done within the shortest possible time.
So far, 16 of the 57 banks, including seven state banks, have brought down their interest rate on lending to single digit.
Such interference to market mechanism will affect the banking industry badly and depositors will be discouraged to put their money in banks, industry experts said.
Taka will lose its attractiveness and depositors will shy away from banks, said Ahsan H Mansur, executive director of the Policy Research Institute, Bangladesh.
“Banks’ liquidity crisis will deepen further,” he said, adding that the decision will mar the progress the country’s financial sector has done over the years.
Furthermore, it goes against the global best practices and open market economy as well, he added.
The decision to cap the interest rates at 6 and 9 percent is not implementable, said AB Mirza Azizul Islam, former finance adviser to a caretaker government. “If banks do not get deposits, how will they lend?”
Sources in the meeting said the Bangladesh Association of Banks, a forum of private banks’ sponsors, demanded relaxing the provisioning requirement against the bad loans that will be rescheduled under latest BB policy.
A bank has to keep aside 100 percent provisioning for bad loans, according to the present policy.
Some BAB members demanded the facility as the government and the BB have decided to give defaulters another lifeline by rescheduling their bad loans with only 2 percent down payment and at 9 percent interest rate.
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