Single digit interest closer to reality
All state-owned enterprises have promised not to demand more than 6 percent from banks for parking their funds with them with a view to facilitating the long-delayed single digit interest rate for lending.
The development comes after private banks told Finance Minister AMA Muhith last week that it would not be possible to bring down the lending rate to 9 percent if the SoEs do not keep their funds with them. Of the 57 banks in the country, 40 are private.
Subsequently, Muhith yesterday sat down with the chief executives of 17 SoEs including Wasa, BPDB, BPC, Petrobangla, BTRC, Sadharan Bima Corporation and Jiban Bima Corporation at his secretariat office.
At present, the SoEs tend to keep their funds through an unofficial process of competitive bidding among banks; whichever bank offers the highest interest rate they go to them with their deposits.
Muhith told the SoEs the practice must now stop; they must deposit their funds with private banks at 6 percent interest or lower, according to an official present at the meeting.
The intervention paves the way for the lending rate to come down to 9 percent and deposit rate to 6 percent from August 9.
But a finance ministry official said the state-owned banks will bring down the interest rates from tomorrow.
However, the funds kept as fixed deposits will be lowered to 6 percent after the expiry of the existing term.
Earlier on June 20, banks announced that the interest rate on lending and deposit would come down to single digits from July 1. But, none of the rates came down, and banks blamed it on the deposit rates being sticky upwards.
Then last week, the banks said the lending rate would definitely come down provided the SoEs keep their funds with private banks and the interest rate on national savings instruments is lowered in line with the bank deposit rates.
The interest rate on national savings certificates will be reviewed on August 8, the finance minister had said on Thursday.
The lowering of lending rate is long overdue as the government and the Bangladesh Bank have extended private banks a host of benefits in the last four months to this end.
The benefits include lowering of corporate tax, slashing of repo rate and reduction in cash reserve ratio as the government moved to decrease the lending rate and ease their liquidity crisis.
Private banks were also allowed to hold 50 percent of the funds of state agencies, up from the previous ceiling of 25 percent.
Currently, the private banks' lending rates hover between 10 percent and 16 percent while the deposit rates are below 6 percent.
But the rates on fixed deposit schemes for three months to three years range between 5 percent and 10 percent; the rates are above 10 percent in a few banks.
However, the interest rates on all types of deposit schemes at state banks are between 3 percent and 6 percent. Their lending rates vary from 11 percent to 13 percent.
Eunusur Rahman, senior secretary of the banking division; Abdur Rouf Talukder, finance secretary, among others, were present.
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