BB ‘strongly asks’ private banks to cut rates

Mehedi Hassan
Published : 06:00, Jul 22, 2019 | Updated : 06:00, Jul 22, 2019

The Bangladesh central bank headquarters in Dhaka. Cyber criminals broke into its computer systems and sent fake payment orders for nearly $1 billion. REUTERS/File PhotoBangladesh 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 chaired by Governor Fazle Kabir with top officials of scheduled banks on Sunday (Jul 21).
“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 spokesperson Md Serajul Islam said: “Private commercial banks will be able to reduce the lending rate below 10 percent when they will get funds at 6 percent rate.”
“They (top executives of private banks) have assured us that they would implement the directive when the demand and supply will match,” said Islam, an executive director with the central bank.
Apart from the availability of deposits at the rate of 6 percent, bringing down the ratio of non-performing loans (NPL) was another tool in implementing the 9 percent lending rate, he added.
Avoiding a question as to if the central bank was putting any regulatory pressure on the banks for implementing the rates, the senior Bangladesh Bank official said that the central bank would observe whether the banks were implementing the rates as per their commitment or not.
He also said 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 Syed 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 percent 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.