Bangladesh Bank in a statement yesterday said it withdrew the 13 percent lending cap for the scheduled commercial banks in line with its flexible principle of interests adopted in 90s, but it would continue its moral suasion to keep it at 15 percent or below.

The statement also said the media reports on liquidity crisis is not based on facts, and the inter-bank call money rate is under control. It is not true that banks are suffering from acute crisis of foreign currencies, the statement added.

Since January 1990 the banking sector had been enjoying the flexible interest policy of the central bank, the objective of which was to let the market itself fix the interest rate for both the lending and the deposit based on demand and supply of funds.

But, the worldwide economic meltdown forced the BB to impose the lending ceiling for agriculture, large and medium industries, housing and trade financing.

Recently, the money regulator lifted the lending cap of 13 percent leaving agriculture and term loans for industry, while the rate on export loan remained at 7 percent and that in case of imports of essential commodity--rice, wheat, edible oil, pulses, onion, dates and sugar—remained at 12 percent.

The clarification came from the regulator at a time when the decision sparked widespread criticism from the businessmen.

About the present liquidity position, the statement said presently the banking sector has an excess liquidity of Tk 240.57 billion, which is continuously on the rise for the last few weeks. According to latest data, inter-bank call money rate among the private banks is now 6.25 percent. Besides, repo auctions are on to pump necessary liquidity to the banking sector.

On foreign currency crisis, it said for the first nine months of the current fiscal year (July-March 2011) the inward remittance stood at US$ 8599m, which is $ 329m higher than that of the corresponding period of the previous year.

In the first eight months, the export earnings stood at $ 14 billion, while the remittance inflow was $ 7.5 billion against total import payments of $ 22 billion for the same period.

Letter of credit (LCs) opening has increased by 72 percent for capital machinery imports at present, the central bank claimed.

The allegations of the funds crisis is not true as the present foreign reserve is $ 10792m as the flow of remittance increased despite hike in total import bills, the statement claimed.

News: Daily Sun/Bangladesh/ Apr-06-2011