BB to press rate cuts

The central bank is expected to push commercial banks into lowering the lending rate by up to 6 percentage points to keep up investment and employment in the backdrop of a global financial crisis.
Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed holds a meeting with all commercial banks today on rate cuts.
The central bank will try to convince the banks to cut the lending rate from 17-18 percent to 11-12 percent.
In a report, the International Monetary Fund (IMF) has said the lending rate in Bangladesh is "very high" if the inflation is taken into consideration.
BB officials said the banks have huge excess liquidity. Excess liquidity was recorded at Tk 21,000 crore yesterday. On the other hand, the call money rate is fluctuating between 2 percent and 10 percent.
It is high time for the commercial banks to cut the lending rate, as exports and remittance are under strains, the official said.
"Investment must be increased to boost employment," he said.
At today's meeting, the banks will be asked to lower all lending rates, except on consumer credit and credit cards.
The Parliamentary Standing Committee on Finance Ministry has also made a strong recommendation to lower the lending rate.
Last week, an IMF mission sent a report to the government with a recommendation for lending rate cuts.
The report said, "Recent actions taken by Bangladesh Bank, including market purchases of foreign exchange, have contributed somewhat to easing monetary conditions."
Still, the real interest rate is elevated, as private lending rates remain high despite the recent deceleration in inflation, according to the report.
Improving efficiency in the financial markets is vital to bring down market rates, and reforms in government's borrowing practices will be a key component in such reforms, it said.