Banks asked to implement order barring govt deposit to errant banks

Staff Correspondent | Published: 00:00, May 24,2019

 
 

The Bangladesh Bank on Thursday asked banks and non-bank financial institutions to comply with a finance ministry instruction barring government, autonomous and semi-autonomous bodies to keep deposits in banks and NBFIs that charge more than 9 per cent interest on loans.
To this end, the central bank’s banking regulations and policy department issued a circular on the day.
Under the latest directive of the Financial Institutions Division issued on May 20, banks and non-bank financial institutions which failed to give loans at nine per cent interest rate as per their commitment to the government will not get funds as savings from the annual development programme.
The errant banks and NBFIs will not also get as savings own funds of the autonomous and semi-autonomous entities of the government.
The finance ministry came up with the instruction as most private banks and NBFIs are yet to implement the government decision of bringing down the lending rate to nine per cent.
The government has long been trying to bring down the lending rate to single digit as the businesses complained that the double-digit interest rates were one of the major reasons for less-than-expected private investment.
An FID official said that the private banks and NBFIs had committed to the government that they would implement the decision on lending rate taken on May 2, 2018.
Before making the commitment the owners of the private banks and NBFIs allegedly mounted pressure and successfully increased the amount of savings by the state-owned agencies in the private banks and NBFIs to 50 per cent from 25 per cent in April that year, he said.
Besides, the mandatory cash reserve requirement of the commercial banks was reduced to 5.5 per cent of their deposits from 6.5 per cent for the benefit of the banking entities during the same period.
The FID instruction also said, ‘The banks and NBFIs who have failed to implement the decision as per the commitment made on May 2, 2018 will not get the ADP funds.’

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