Clients having good records offered loans at single digit interest rate

Fixed deposit rates have come down to as low as 4 percent on the back of low demand for loans, bankers said.

The country's inflation is at 6.2 percent but banks offer 4-4.5 percent for deposits of 3-12 months, meaning a depositor's earning will become negative.

In addition, interest rate earned on bank deposits is subject to tax of 10-15 percent. After paying the tax, a depositor's net earnings will be negative by around 2 percentage points.

Industry analysts found that interest rates on deposits were 7 percent to 9 percent for most of the time in 2014 and 2015, down from 11-12 percent in 2013.

“We will further cut our deposit rates as we have huge liquid funds,” said Anis A Khan, managing director of Mutual Trust Bank and chairman of Association of Bankers Bangladesh.

Presently, MTB offers 4 percent interest rate for fixed deposit of 2 months' tenure and highest 7 percent for 3-year deposits.

Khan said lower demand for overall credit, less government borrowing, declining inflation and inflow of remittances are contributing to the declining deposit rates.

The banks appear to be in a race to reduce deposit rates in the wake of piling funds.

As of December last year, the banking sector had excess liquidity of more than Tk 100,000 crore.

The average loan-deposit ratio of banks stood at 70 percent at the end of December, although they could have lent at least Tk 80 against every Tk 100 deposit, according to Bangladesh Bank data. Treasury officials at different banks are in a fix on how to handle their money as the demand for credit has been waning since 2013.

Private sector credit growth came down to less than 13 percent in December 2015 from over 25 percent in 2011.

The situation has forced banks to abandon high-cost deposits and concentrate on low-cost current and savings accounts.

“We have released high-cost deposits last year to reduce pressure on fund management and profitability,” said Ahmed Kamal Khan Chowdhury, managing director of Prime Bank.

Prime Bank offers a maximum of 5.5 percent for fixed deposits regardless of the tenure. It gives the highest 4.5 percent for short-term fixed deposits. “When I have excess funds, I don't need deposits,” Chowdhury said, hinting at further cuts in his bank's deposit rates in the coming days.

In addition to lower demand for loans from businesses, he said no borrowing by Bangladesh Petroleum Corporation for oil imports and declining commodity prices across the world have affected the banks' business.

Pubali Bank, which is the largest private bank in terms of branch network, offers 6 percent interest for fixed deposit.

“I am under pressure to slash the rate further,” said Abdul Halim Chowdhury, managing director of Pubali Bank.

Muklesur Rahman, managing director of NRB Bank, one of the nine new banks, said they offer 6 to 8 percent rates for fixed deposits depending on the tenure and amount, down from 10 plus percent interest a year ago.

Rahman said he wants to slash the rates further, but as a new bank he cannot do it unless interest rates in savings certificates come down from 11 percent.

Most of the foreign banks operating here are discouraging deposit collection in response to the lower demand for loans.

As of December 10, 2015, Citi's deposit growth went nearly 8 percent in the negative year-on-year, while HSBC's deposit growth was minus 0.58 percent.

When the depositors' earning is declining, borrowers are cheering up as they are getting loans at single digit, which never happened in Bangladesh except in some extraordinary cases.

Economic Reporter :Social Islami Bank Limited (SIBL) has signed an agreement with Butterfly Marketing Limited on 0%-i pay services of the bank recently. Under this agreement, SIBL credit cardholders can purchase products of Butterfly Marketing Limited in 6 months equal installment without paying any profit. Managing Director of Social Islami Bank Md.  Shafiqur Rahman and Managing Director of Butterfly Marketing Limited M.A. Mannan signed the agreement on behalf of the respective organizations.

Md. Quamrul Islam Chowdhury has been promoted as Additional Managing Director (AMD) of Mercantile Bank Limited.
Prior to this he was the Deputy Managing Director (DMD) of the bank, said a press release.
Quamrul Islam Chowdhury comes from a respectable Muslim family of Sonaimuri under Noakhali District.
He started his banking career in 1983 with National Bank as Probationary Officer after successful completion of B Com. (Hons) and M Com. in Marketing from University of Dhaka.
He joined NCC Bank in 1994 and performed with various responsibilities till 2001.
Thereafter, he joined Mercantile Bank in 2001. He was positioned with various assignments in this bank. He was the Head of Khatungonj Branch and Agrabad Branch.
He attended training programme, seminar and workshop in both home and abroad.

Md. Golam Faruque, Md. Abdus Salam Azad and Md. Nazrul Islam Farazi recently joined Bangladesh Krishi Bank (BKB) as Deputy Managing Directors (DMDs).
Prior to his new position, Md. Golam Faruque was GM, Jannata Bhaban Corporate Branch of Janata Bank Limited. He started his career in Janata Bank in 1984 as senior officer. He obtained B. A. (Honours) and Master’s in Economics from Dhaka University in 1983.
Md. Abdus Salam Azad was GM (HR) of Janata Bank Limited. He started his career in Janata Bank Limited in 1983 as senior officer. He obtained B. A. (Honours) and Master’s in English from Rajshahi University in 1983. He actively participated in the war of liberation in 1971.
Md. Nazrul Islam Farazi was GM of Agrani Bank Limited. He started his career in Agrani Bank Limited in 1984 as financial analyst (senior officer). He obtained B.Com. (Hons.) and M.Com. in Finance from Dhaka University in 1984.

Sheikh Moulana Mohammad Qutubuddin, Chairman of Shari`ah Supervisory Committee of Islami Bank Bangladesh Limited and President of Baitush Sharaf Anjuman-e-Ittehad Bangladesh, presiding over the meeting at its Tower on Tuesday. Mohammad Abdul Mannan, Manag

Economic Reporter :A meeting of the Shari`ah Supervisory Committee of Islami Bank Bangladesh Limited was held on Tuesday at Islami Bank Tower. Sheikh Moulana Mohammad Qutubuddin, Chairman of the Committee and President of Baitush Sharaf Anjuman-E-Ittehad Bangladesh presided over the meeting.The meeting was attended among others by Mufti Sayeed Ahmad, Vice-Chairman of the Committee and Mufti of Al Jamiatus Siddikiah Darul Ulum (Madrasha-e-Furfura Sharif), Professor Dr. Abu Bakr Rafique, Member Secratery and Pro-Vice Chancellor, International Islamic University Chittagong, Abdur Raquib, Ex-Executive President of the Bank, Mufti Shamsuddin Zia, Mufti and Muhaddis, Al-Jamiatul Islamia, Potya, Chittagong, Moulana Abdus Shaheed Naseem, President of Bangladesh Quran Shikkha Society, Dr. Hasan Mohd. Moinuddin, Associate Professor of Asian University of Bangladesh, Professor Dr. A.S.M. Toriqul Islam, Islamic University, Kustia, Dr. Mohammad Abdus Samad, Associate Professor of Asian University of Bangladesh, Dr. Mohammad Manzur-e-Elahi, Associate Professor of National University, Moulana Mohiuddin Rabbani, Principal of Darul Quran Madrasa, Dhaka Members of Shair'ah Supervisory Committee, Mohammad Abdul Mannan, Managing Director, Muhammad Abul Bashar, Deputy Managing Director, Md. Shamsul Huda and Mohammed Shahid Ullah ACA, Executive Vice Presidents of the Bank.  The meeting took various decisions on compliance of Shari`ah and expressed satisfaction in overall activities of the Bank.