The decision to bring down the lending rate to nine per cent and deposit rate to six per cent by banks has witnessed so far a very limited implementation as most of the banks failed to execute the decision by the fresh deadline — August 9.
Finance minister AMA Muhith on August 2 declared that the lending at 9 per cent and deposit rate at 6 per cent would come into effect from August 9.
The fresh deadline was announced following the banks’ failure to bring down the interest rates to single digit by the July 1 deadline, set on the basis of a June 20 meeting between the finance minister and bank owners association Bangladesh Association of Banks.
Although a number of banks announced fresh rates in line with the bank owners’ decision, most of them are offering lending rate at 9 per cent for only a few loan products.
Asked about the implementation status, Association of Bankers, Bangladesh chairman Syed Mahbubur Rahman told New Age, ‘All the banks will have to execute the announced rate as it has been instructed by the prime minister. But, it might take some time due to scarcity of low cost fund.’
‘All I can do, from my part, bring the rates within the limit and we have already done it,’ he said.
Many of the corporate entities were unwilling to deposit fund below 7.5 per cent, he added.
In this context, bringing down lending rate might result in profit fall or losses for the banks, said Mahbubur, expecting that the rate would come down gradually as per the announcement.
Senior bank officials said that they were yet to bring down the rates due mainly to the deposits which were collected at high rates by the majority of the banks.
Banks cannot reduce the lending rate without taking deposit rate into consideration, they said.
They said their employees were busy visiting and knocking people and entities to pool funds at the rate of 6 per cent or around 6 per cent, the responses were almost zero even from the government entities.
As there is a scope for people to get up to 11.5 per cent returns by making investments on national savings certificates, people would not waste the scope by putting funds in the banks at 6 per cent rate, they said.
The bankers said there was no debate that the single digit lending rate was needed, but forceful implementation of such rate would hardly bring any positive result instead it might weaken financial health of the banks especially of the new ones.
Huge amount of classified loans in the banking sector, which was Tk 88,589 crore at the end of March, 2018, was identified as another barrier to reducing lending rate.
Meanwhile, Muhith on August 7 ruled out any change in the interest rates of the savings certificates before the next general elections likely to be held in December.
‘Whatever changes may come in the interest rates of savings certificates it will come into force after the next general elections,’ he said.
The government wants implementation of 6 per cent deposit rate and 9 per cent lending rate in banks but does not want to reduce the rate of returns from NSCs, which is contradictory, the bank officials said.
They also said that the availability of fund from state-owned banks at 6 per cent rate was yet to be ensured despite the fact
that they were pledged to provide with such loan facility.