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Download PDF The government yesterday asked the central bank to take initiatives so that commercial banks keep the difference between deposit and loan interest rates within two-three percent to boost investments and reduce business costs.
The government also decided to relax the interest waiver policy of the state-owned banks to recover old and bad loans.
“Free market economy does not mean that one can do anything one wishes. The central bank (Bangladesh Bank) should play the mediating role in such a situation,” Finance Adviser Mirza Azizul Islam said after a meeting with the top brass of state-owned and private commercial banks.
Sources said the finance adviser in the meeting with bankers asked to lower the interest rates on lending which will ultimately reduce the difference between deposit and loan interest rates.
“The central bank has been directed to start talks with the banks immediately in this regard,” a source said.
The finance adviser was talking to the reporters after the meeting. Bangladesh Bank Governor Salehuddin Ahmed was also present at the meeting held at the planning ministry.
Representatives of Bangladesh Association of Banks (BAB), an association of bank owners, and Association of Bankers Bangladesh (ABB), a platform of managing directors of banks, attended the meeting.
The chief adviser recently sent a letter to the Bangladesh Bank governor suggesting to keep the difference between deposit and loan interest rates of banks within four-five percent.
Despite the stagnant business situation in the country last year, private commercial banks made a handsome profit, which was 41 percent more than the preceding year.
The profit was largely due to the huge difference of interest rates and high charges on different banking services, banking sources said.
The average difference of interest rates in banks is now 6.16 percent. At state-owned banks it is 5.88 percent, at private commercial banks it is 6.17 percent and 8.91 percent at foreign commercial banks.
The government side, finance ministry and the central bank, in the meeting also raised the point of taking high commissions and charges from clients for opening Letter of Credit and different banking services.
“Besides, the Bangladesh Bank has been assigned to prepare a guideline on charges on banking services as the charges for the same services vary at different banks,” a source said.
The meeting decided to relax the loan waiver policy and as per the new rules state-owned banks can waive the entire interest, if necessary.
As per the present rule, the state-owned banks take 8.5 percent of the interest as cost of fund.
UNB reports: The finance adviser said, “We have decided to relax the policy framework in this regard.” He said it would help clear the balance sheet of the Sonali, Janata and Agrani banks as well as mitigate the woes of the defaulters.
As per the decision, after formulation of guidelines in this regard respective bank boards would be able to waive interest on loans taken by a closed or a deformed project even without recovering the cost of fund of the loans provided to the project.
The boards will also be able to waive the interest in case the respective banks consider that the cost of fund could not be recovered even after selling out the assets (or collateral) of the project concerned or after taking all possible legal measures.
The bank boards will be able to waive interest when convinced that they will be able to recover not more than 300 percent of the principal plus interest.
In case of accident, disaster or death of borrowers, Aziz said the government has decided to increase the interest waiver amount from Tk 5 lakh to Tk 10 lakh.
Meanwhile, Bangladesh Bank yesterday sent letters to all commercial banks asking them to simplify rules regarding financing imports and exports.
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