Depending on deposit collection situation, the interest rate on bank loans may start to come down in six months when the reduced cash reserve ratio becomes effective, chief executives of a number of banks said on Sunday.
The government and the Bangladesh Bank took a number of initiatives in an unprecedented manner in March this year with a view to cutting lending rate following pressures from bank owners.
The policy relaxation to bring banks’ lending rate down to single digit to facilitate business growth includes cutting CRR to 5.5 per cent from 6.5 per cent, allowing state-owned entities deposit up to 50 per cent of their funds in private banks and non-bank financial institutions and extending time to adjust ADR till March 31, 2019.
In March, finance minister AMA Muhith said that the lending rate would come down to single digit within one month.
The lending rate depends on deposit rate, argued chief executives of a number of banks.
Mutual Trust Bank managing director and chief executive officer Anis A Khan, BRAC Bank MD and CEO Selim RF Hussain, and EBL MD and CEO Ali Reza Iftekhar said in the same vein that the lending rate might decline depending on deposit collection situation.
Anis A Khan, while speaking at an event of the MTB on Sunday, said that it would take another 5-6 months to cool down the increasing interest rate in banks.
‘To support the country’s business growth, we need money and foreign exchange at an affordable rate,’ the MTB managing director said.
‘If I have to pay 10 per cent against the deposit then I will have to charge 15 per cent from the borrowers,’ he said.
‘Within such a low inflation, no businessman would be able to survive by paying 15 per cent interest against loans,’ Anis said.
‘That’s why the government should stop selling national savings certificates and giving subsidies in this form. The same amount of subsidy should be given through social welfare projects,’ he said.
‘In the banking system, a mismatch in long term financing requirements against the supply of money has been prevailing,’ the MTB MD said.
‘The money from the CRR would be released from today and I hope that it would take at least 5-6 months to have its impact on the overall system,’ he said.
When asked, Ali Reza Iftekhar told New Age, ‘The lending rate would not decline as long as the deposit rate remains high.’
‘When we would be able to collect deposit at lower cost, banks would be able to reduce lending rate as well,’ he said.
He added that it might take another 3-6 months to bring the lending rate down.
Selim RF Hussain said that the interest rates of deposit and lending were nothing separate. ‘As long as deposit rate remains high, it would not be possible to reduce lending rate,’ he said.
‘We do not think that the lending rate would come down overnight... it would not happen before 3-4 months,’ he said.
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