Bank interest rate comes down gradually: BB governor

Posted by BankInfo on Tue, Oct 08 2013 01:09 pm

Dhaka, Oct 7: Bangladesh Bank governor Dr. Atiur Rahman hoped that the high rate of bank interest would come down gradually with decline of inflation rate which he has already scaled down substantially in recent days. The rate of inflation came down to 7.13 last month as against about 13 per cent in last year. “Nothing to be worried. Keep patience. The interest rate will come down as the rate of inflation slowed down,” said the governor while addressing a seminar on “Bank interest rates and Charges” at Bangabandhu International Conference Centre (BICC) conference room in Dhaka.
Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) organised the seminar to discuss the issue of high bank interests and charges which, the businessmen said, are hampering their trade and business seriously. Speakers at the seminar strongly protested the high rate interest and urged government intervention.
Finance Minister AMA Muhith, who attended the meeting for a short while, also admit the allegation adding that the interest rate spread should not be more than 4 percent. He tactfully avoided the businessmen’s demand for cut the bank interest rate adding that the government is still in power until announcement of the election schedule.  “Many think, the government’s authority to take any policy decision will be over this month, but I think we’ll have such authority until the next election’s schedule is declared. So, discuss the issue, send your proposal, we will think and 
take decision,” said the minister who leaves Dhaka Monday night for Washington DC to attend IMF annual meeting.
The governor also instructed the banks to reduce their cost of operations by cutting unnecessary expenditures and thus help reduce the spread of interest rate.  Despite the global economic meltdown, he said, the country’s economy still remains steadfast and doing well. “We are trying to reduce the service charges,” he added.
Attributing the reason behind high bank interest to huge accumulation of bad loan, the governor urged the bankers to be more cautious about lending loan and concentrate more on quality lending. Provisioning against bad loan is increasing the interest rate, said the governor.  Although the amount of debt loan has decreased substantially in recent days, still it is higher than any neighbouring countries.
Banking division secretary Dr. Aslam Alam, who attended the programme as a special guest, also urged the banker to reduce operational cost, introduce online banking and bring the huge unbanked people under banking network which he said would help reducing the interest rate.
Presided over by FBCCI president Kazi Akram Uddin, the programme was also addressed among others by former FBCCI president AK Azad, BAB chairman Nazrul Islam, industrialist MA Hashem and BGMEA president Atiqul Islam. Olicy Research Institute Executive Director Ahsan H. Mansur presented the key note paper on the subject.
Dr. Mansur in his paper said that the high interest rate and charges had adversely affected investment and domestic economy. He discussed in details the issues that control the rate of interest and structural aspect of the economy and the banking system. 
Dr Ashan H Monsur said that bank interest rate is high in Bangladesh because of increasing default and non-performing loans (NPLs) in the banking sector. “It’ll be very difficult to lower the interest rate until the NPLs are decreased,” he added.
Earlier, Kazi Akram Uddin and AK Azad urged government to take immediate measures to reduce bank interest rates and other charges. They also criticised the government for increasing the rate of interest in the case of savings certificates.

News:The Independent/8-Oct-2013