Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has asked the commercial banks to finance in priority sectors including productive ones in line with the newly announced monetary policy, officials said.
The advice came at a bankers’ meeting held in the central bank on Thursday with Bangladesh Bank Governor Atiur Rahman in the chair.
On January 26 last, the BB unveiled a ‘restrained’ monetary policy aiming to bring down inflation to a single digit from the current level of over 10 per cent through discouraging credit flow to unproductive sectors.
The commercial banks have also been asked for taking necessary measures to implement the existing monetary policy properly.
The central bank also asked the commercial banks to keep the interest rate spread less than 5.0 per cent in line with the BB’s directive.
On January 22, the central bank asked the commercial banks to fix the limit of difference between the lending rate and the weighted average of rates of interest on deposit, or the intermediation spread, below 5.0 per cent, other than high-risk consumer credit, including credit card and small and medium enterprises (SME) loans.
“We’re now pursuing a caution monetary policy to stem the inflationary pressures on the national economy,” Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.
He also said the central bank has asked the bankers to expedite credit flow to productive sectors rather than less productive ones.
“We’ve asked the banks to ensure import financing for essential items including food grains and fertilizers,” the deputy governor said, adding that the banks may reduce their credits to less productive sectors including luxurious items.
At the meeting, the bankers assured the central bank to maintain their self imposing cap on both lending and deposit rates properly, the central bank deputy governor said.
Regarding the government bank borrowing, Mr. Sur said the government bank borrowing came down to BDT 160 billion from BDT over 210 billion earlier.
“The government is now taking measures in line with the BB’s suggestions, which were submitted earlier, to contain its bank borrowing through reducing subsidies,” he noted.
Admitting the liquidity pressures of primary dealer banks (PDs), the BB deputy governor said the central bank is now providing liquidity support to the PDs each working day to ease such pressure.
“We’re now thinking pro-actively to do more for the PDs,” he said, adding that the central bank will finalise fresh policy support consultation with the stakeholders.
The BB earlier selected 15 PDs — 12 banks and three non-banking financial institutions (NBFIs) — to deal with government securities in the secondary market.
The ABB welled come the BB’s latest monetary policy, saying that the professional body will try to implement the policy properly.
“We’ll enact self regulation, if necessary, to ensure a rational interest rate in the country’s banking sector,” ABB Chairman Nurul Amin told reports while replying to a query.
BBN/SSR/AD-09Feb12-7:33 pm (BST)
