House panel suggests lending rate cut

A House panel yesterday made a set of recommendations incorporating a cut in lending rate and cash reserve ratio (CRR) to keep up the pace of domestic demand and bring a momentum in business activities amid the ongoing global recession.
The parliamentary standing committee on finance ministry also asked the law ministry to take necessary steps to plug the loopholes in money loan court act for which loan defaulters can make their escape.
"The committee has asked all banks to cut lending rate and cash reserve ratio to cope with the ongoing financial meltdown and bring pace in banking activities," AHM Mustafa Kamal, chairman of the standing committee, told reporters at the Jatiya Sangsad media centre after a meeting.
"We have also asked the banks to raise their paid-up capital to at least Tk 400 crore by 2011 to manage operational risks," he added.
At present, lending rate in private banks is 13 percent, while cash reserve ratio is about 4.5 percent.
The committee chairman said the banks would fix the lending rate and CRR through consultation with the Bangladesh Bank.
There are loopholes in every laws and the money loan court act is not an exception, Kamal said, adding: "So the recovery of loans in default is hampered."
"We have asked the law ministry to plug the loopholes in the respective laws," he said.
"We have also directed the authorities concerned to increase the number of judges at district-level money loan courts," the committee chief said.
The committee in another directive asked all banks to reduce dependency on interest rate for making profit, and called upon those to come up with innovative products.
The parliamentary body also suggested that banks reduce service charges and costs of operation.
Presided over by the committee chairman, the meeting was attended, among others, by committee members Ali Ashraf, Tajul Islam, MA Mannan, MK Anwar, Bangladesh Bank Governor Atiur Rahman, National Board of Revenue Chairman Nasiruddin Ahmed, Securities and Exchange Commission Chairman Md Ziaul Haque Khondker and managing directors of thirty private banks.