Finance minister for simple interest rate on bank loans

Staff Correspondent | Published: 01:11, Mar 19,2019 | Updated: 01:13, Mar 19,2019


Finance minister AHM Mustafa Kamal on Monday said they would consider calculating interest rate of loans at simple interest basis as opposed to the compound rate formula.
The bank management now calculated the interest rate at compound basis, he told reporters at a press briefing after a view exchange meeting with the directors of the state-owned commercial and specialised banks at the Planning Commission.
A banking expert, however, said implementation of such a plan would send wrong signals to the good borrowers who service debt timely.
Mustafa Kamal noted that the number of loan defaulters was increasing in the country due to the practice of calculating loan using compound rate by bank managements.
He also noted that nowhere in the world interest rate was calculated using compound rate.
In response to a question the finance minister said that the simple rate might be applied from the new fiscal.
He also said they wanted to help the borrowers who are suffering due to the compound interest rate.
As an immediate reaction, former Bangladesh Bank deputy governor Khondokar Ibrahim Khaled told New Age that bankers in India follow the compound interest rate.
He said wilful loan defaulters would be benefited from such a step.
Mustafa Kamal, however, reiterated his stand that only eligible people would now be appointed in the boards of state-owned banks as directors.
He also reiterated that assets management companies would be hired to help recover bad loans.
He additionally said that they would prepare insolvency act and introduce crop insurance in the next fiscal.
Measures were also taken by the central bank to develop bond market, he said.
Among others, prime ministers’ private industry and investment adviser M Salman Fazlur Rahman, Bangladesh Bank governor Fazle Kabir and Bank and Financial Institutions Division secretary Ashadul Islam were present at the briefing.

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