Finance minister AMA Muhith on Wednesday defended tentative bankers unable to bring down the lending rate to single digit from this month despite such a commitment by owners of the banks.
It would take more time to implement the decision, he said while responding to a question about most banks’ failure to comply with the government policy decision taken to foster private sector investment.
Muhith was talking to reporters following meetings of cabinet committees on economic affairs and national purchases at the Secretariat.
He noted that the target was a difficult one while the announcement was untimely.
‘I had stated during the announcement that it was better to implement the decision as quickly as possible,’ he said.
Most banks were reportedly in the dilemma over implementing the bank owners’ decision to cut the lending rate to single digit (9 per cent) keeping the deposit rate at 6 per cent as they feared the move would put financial health of embattled banks into further disarray.
Muhith rejected that diverse rates of lending would bring indiscipline to the banking sector. He hoped that Bangladesh Bank would look into the matter.
Muhith, however, admitted that it was not surprising that state-owned agencies were withdrawing savings from private banks because of the cut in the deposit rate.
After all, it is linked with business, he said.
Experts warned that forceful implementation of the single digit lending rate would weaken the banks run by professionals called bankers.
They noted that 57 banks’ 700 directors, who took one-seventh of Tk 8,92,403 crore loans disbursed until May this year, had no legal rights to impose such a decision on the banks’ management.
Huge amount of classified loans in the banking sector, which increased to Tk 88,589 crore at the end of March 2018, would be another barrier to reducing the lending rate, they said.
Muhith while presiding over the meeting of the cabinet committee on economic affairs sent back the proposed ‘overseas equity investment guidelines 2018’.
Officials attending the meeting said that the Financial Institutions Division which placed the proposal was asked to re-examine it before submitting again.
The guidelines proposed the highest ceiling on investment be set at 20 per cent of export earnings or up to 25 per cent of the company’s net annual income from exports.
Parent company and overseas subsidiary company have to submit audited financial statements, including important documents, to the National Board of Revenue and to the Bangladesh Bank to ensure monitoring on overseas investment regularly, according to the guidelines.
As per a provision included in the guidelines, the report on business environment will have to be submitted to the central bank and also to the foreign affairs ministry with the aim of bargaining with foreign governments and exploring possibilities of fresh investment and trade facilities and brightening the image of the country as well.
According to the draft guidelines, entrepreneurs might be allowed to make investments in the countries where there were no restrictions on Bangladeshi nationals to work and send back their incomes to Bangladesh.
Another provision suggests not making investments in countries or areas identified by the Financial Action Task Force as ‘risky’.
Besides, equity investment by Bangladeshi entrepreneurs would not be allowed in countries where United Nations, European Union, and Office of Foreign Asset Control (OFAC) have imposed sanctions.
The guidelines were prepared at a time when the government allowed in October local industrial conglomerate Akij Group to send $20 million to acquire a Malaysian company after the cabinet committee on economic affairs decided, in principle, to allow equity investments abroad by Bangladeshi nationals.
Apparel maker Ha-Meem Group and automobile assembler Nitol-Niloy Group also sought permission to make equity investments abroad.
But both the proposals were yet to receive green signal from the government.