Sunday, 15 December, 2019

Single-digit rates at 59 banks from October : Finance Minister

Published on: 12:51 am - Monday | August 5, 2019


Finance Minister AHM Mustafa Kamal on Sunday said that single-digit interest rates — flat 9% for lending and 6% for deposit — would be implemented fully at all 59 scheduled banks from October after the end of third quarter (July-September) of the current calendar year.

He said Bangladesh Bank (BB) would soon be coming up with the announcement of a flat rate of 6% interest for depositing with both private sector and state-owned banks.

“A circular to this effect will soon be issued to banks,” Kamal said at a press briefing that followed an hours-long meeting with chairmen, managing directors (MDs) and chief executive officers (CEOs) of private banking companies at BB headquarters in the capital.

He said the interest rate cut for deposit was aimed to facilitate lending at a flat rate of 9% for meeting the budgetary goal of investment influencing gross domestic product (GDP) growth at 8.2%.

Some 16 banks, out of total 59 banks, took measures to execute single-digit lending rates, said the finance minister, adding that seven of the 16 were state-owned while the rest nine private banks.

“We will get the June-end financial statements of banks in September. We will review the financial reports of banks and then we will go for full scale implementation of single-digit interest rates,” the finance minister told the media.

“In today’s meeting, we have reviewed the current state of the banking sector. The government will do whatever it can for the wellbeing of the country. Banks shall comply with the government’s GDP growth target set in the budget. If needed, we will help banks with various supports,” he added.

The finance minister said that a comprehensive circular for banks was pending, which was aimed to make the banking sector stronger. “In the under-process circular, interests of all stakeholders will be protected.”

The finance minister said the scenario of non-performing loans (NPL) at banks would change during the second and third quarters of current calendar year.

He said no new NPL would be generated.

Expressing his surprise at high lending rates, the finance minister said: “What is the benefit of charging 14%-16% interests on lending if the money does not return?”

He said banks must go for interest rates cut for lending if they wanted to remain competitive.

The finance minister said a bank might sometime incur loss like an enterprise did. “In business, you should be prepared for making both losses and profits.”

He said a borrower might default for genuine causes. “Such borrowers will be entitled to receive our support in many ways. But, those who had the ability to return banks’ money but did not payback will face penalty.”

Admitting that the country’s banking sector was overlooked and did not get proper nourishment in last few years, he said: “Suddenly, the country’s economy got bigger. It was arithmetic development in our economy. Therefore, we could not nourish banks and financial sector as needed.”

He said the government would do whatever would be required for sustainable growth of the private sector.

He said the country’s private sector shared 80%-82% of the economy.

The finance minister said he would sit again in September to review the progress in the implementation of the single-digit interests by banks.

He warned that permission for banking operation would be cancelled if a bank did not materialize interest rates cut.

“Come out of the compound interest rates. Keep in mind that if the government can give permission for launching a bank; it can also cancel the permission,” he said.