Bangladesh Bank (BB) has strongly asked private banks to bring down their lending and deposit rates to single digits.
The instruction came at a meeting of the central bank with top executives of scheduled banks on Sunday. BB governor Fazle Kabir chaired the meeting.
“Fazle Kabir has strongly asked private banks to bring down their lending and deposit rates. He asked private banks to keep their promises they had made one year ago," said a meeting source.
But, in a press briefing after the meeting, Bangladesh Bank Executive Director Md Serajul Islam said: “Private commercial banks will be able to reduce the lending rate below 10% when they will get funds at 6% rate.”
‘They (top executives of private banks) have assured us that they would implement the directive when the demand and supply will match,’ the BB ED said.
Apart from the availability of deposits at the rate of 6%, bringing down the ratio of non-performing loans (NPL) was another tool in implementing the 9% lending rate, said Serajul.
Avoiding a question as to if the central bank was putting any regulatory pressure on the banks for implementing the 9-6 per cent rates, the BB executive director said that the central bank would observe weather the banks were implementing the rates as per their commitment or not.
He also mentioned that almost all the state-owned banks along with some private banks implemented the interest rates, while the rest were trying to implement the rates gradually.
‘We all want to implement the single digit interest rate as the lower rate of lending rate helps economic growth,’ said Association of Bankers, Bangladesh president Sayed Mahbubur Rahman.
Considering the economic impact, the meeting discussed how the rate could be brought down, he said.
He expected that the NPL would decline significantly at the end of June quarter but might not come down below 10 per cent now.
He also said that the existing situation of the banking sector, offshore banking functions and the economy, dissemination of loans to micro, cottage and small entrepreneurs were also discussed in the meeting apart from the implementation of 6-9 per cent interest rates.