All the scheduled banks have revised downward their interest rates against deposit and lending in line with a decision of the Association of Bankers, Bangladesh (ABB) to help combat inflation.

ABB, the apex body of the chief executives of the country’s private banks, at a meeting last week advised all private banks to cap their interestrates for deposit at 12.5 per cent and loans for industrial and working capital at 15.5 per cent.

“All the private banks had started following our suggestion from Wednesday (February 8) to re-fix their rates of interest for deposit and lending,” ABB Chairman and Managing Director of NCC Bank Nurul Amin told BSS yesterday. He said necessary directives had also been sent to all banks’ branches across the country so they can follow the suggestion accordingly.

Amin said the ABB decided to reduce the bank rates on request of Bangladesh Bank (BB) to fix a reasonable rate of interest to avoid unhealthy competition among banks to tape deposit and charging more for advances. The central bank also asked the banks to keep the spread (gap between deposit and lending rates) at 5 per cent.

ABB Vice Chairman and Managing Director of Pubali Bank Helal Ahmed Chowdhury said they had reduced bank rates in the greater interest of the economy. “This will help accelerate the trade and investment,” he observed. The ABB earlier took a similar decision, which was not implemented for some reasons, said Helal, but he was confident this time that all the banks would follow the advice.

A central bank official said the cost of credit management is no more than 9 per cent expecting in micro-financing and SME lending.

“Adding 4-5 per cent interest on the credit management cost takes the lending rate not above 15 per cent. So, the banks can comfortably make business even after reducing their lending rate as suggested by the ABB,” he said.

All the banks increased their interest rates against deposit and lending early last month after the central bank lifted the 13 per cent ceiling on the interest rate on all types of bank loans, except for pre-shipment exports and farm loans as they are thrust sectors. The ABB voluntarily reduced the bank rates for deposit and industrial and working capital.

The Daily Sun/Bangladesh/ 14th Feb 2012