The Financial Institutions Division has set the interest rates of deposits by the state-owned enterprises in the private and public commercial banks and non-bank financial institutions amid demand by the bankers for the funds for implementing much-vaunted single-digit lending rate from the revised deadline of April 1.
It set the rate at the highest 6 per cent for depositing maximum 50 per cent of their funds by the state agencies in the private banks, according to a circular issued by the FID on Sunday.
The division set the interest at 5.5 per cent for depositing funds by the state agencies in the public commercial banks.
Money meant for endowment, pension and provident fund will not come under the purview of the directive.
The circular said that the FID set the interest rates to implement the single-digit lending rate that the government policymakers had been trying to implement since 2018.
But most of the private commercial banks failed to implement the decision and cited a number of reasons including non-implementation of the FID’s previous directive issued in April, 2018 on depositing 50 per cent of state agencies’ fund in private banks.
Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh Limited (ABB), said they welcomed the government decision on setting the interest rates.
The previous directive did not mention anything about the rates, he said.
Iftekhar said they were not concerned about the proposed bill aimed at allowing the government to use the ‘surplus funds’ of different government agencies for ‘public welfare’.
He pointed out that the finance minister assured them of depositing the funds they would mobilise from the state agencies quickly in the banking channel.
Earlier, the government fulfilled at least five demands made by the private banks against the decision that they would implement single-digit lending rates.
The prime minister and the finance minister have reminded the Bangladesh Association of Banks, which represents the private bank owners, several times in last 16 months of implementing the decision.
FID officials said that the government in January, 2018 amended the Bank Company Act 1991 in parliament, allowing four members of a family to be directors of a bank, up from the previous two.
The amendments, pursued by the Bangladesh Association of Banks, also allowed the directors to stay in their positions for three consecutive terms, or nine years, an increase from earlier two-terms or six years.
Following a demand from the same association, the Bangladesh Bank also lowered the mandatory cash reserve requirement of commercial banks to 5.5 per cent of their deposits from 6.5 per cent.
The government set the current deadline for implementing the single-digit rate a couple of days before the January 1 deadline expired.