Dhaka, Bangladesh (BBN)- The central bank of Bangladesh rejected the country’s apex trade body’s plea on Tuesday to re-impose lending rate cap, saying the lifting of the interest ceiling will not hamper industrial expansion.
“We do not want to re-impose lending cap at this moment,” Deputy Governor of the Bangladesh Bank (BB) Nazrul Huda told reporters after a meeting with the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
An 15-member FBCCI delegation led by its President AK Azad met the Bangladesh Bank governor and requested the central bank to re-impose the lending rate cap to help boost industrial expansion, especially the small and medium scale plants.
The FBCCI delegation said commercial banks have started charging lending rates between 15 and 18 per cent, up from 13 per cent the BB had fixed before the withdrawal of the cap on March 9 this year.
“It will push up the cost of doing business in Bangladesh,” FBCCI President AK Azad said.
At least 11 private commercial banks are now charging interest rates on working capital to large and medium scale industries ranging between 13.50 per cent and 18 per cent, according to the central bank statistics.
“The higher bank lending rates will push up both import costs and raise the prices of essential commodities further, adversely impacting the overall investment situation,” the FBCCI chief added.
The existing interest rates on working capital to large and medium scale factories will be discussed at the bankers meeting scheduled to be held on April 10, a senior BB official told the FE.
He also said the BB will ask the banks at the meeting to re-fix such interest rates at maximum 15 per cent.
On April 2 last, the FBBCI expressed its deep concern over sudden rise in lending rates, saying that it will hamper the overall economic growth.
“The level of investment may stagnate gradually as the country’s overall business activities have fallen into a three-dimensional crisis due to inadequate liquidity supply, higher interest rates on lending and shortage of foreign currency,” the FBCCI said in a statement earlier.
The lending rate cap was withdrawn in all sectors barring two — agriculture and industrial term loan — after nearly two years, following the increase in deposit rate that created a mismatch between the cost of funds and the interest rate ceiling set by Bangladesh Bank on lending operations by the banks.
Earlier it asked the commercial banks on April 19, 2009 to enforce the ceiling on lending rate in five specific areas at 13 per cent to help mitigate the impact of the then global economic meltdown.
The five areas for which a ceiling on lending rate was then fixed were: agriculture, term loan and working capital to large and medium-scale industries, housing and trade financing.
BBN/SSR/AD-06Apr11-2:44 am (BST)
