Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is likely to impose a cap the interest rate on industrial loans from January 01, 2020 to facilitate the economic growth.

The central bank formed a seven-member high-powered committee, headed by its deputy governor S M Moniruzzaman, on Sunday to find out ways for bringing down the industrial lending rate to single-digit shortly in line with the Ministry of Finance advice.

Other members of the committee are Kazi Akram Uddin Ahmed, chairman of Standard Bank Limited, Zaid Bakht, chairman of Agrani Bank Limited, Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited, Md Obayed Ullah Al Masud, MD and CEO of Rupali Bank Limited, Shah A Sarwar, MD and CEO of IFIC Bank Limited, and Mehmood Husain, MD and CEO of NRB Bank Limited.

The committee has been asked to submit its report to the BB governor by seven working days, a senior official of the central bank told the BBN in Dhaka.

He also said the committee will also consider ensuring profitability of the banks (after implementing single-digit lending rate).

After a meeting with the chairmen and managing directors of both public and private sector banks, Finance Minister A H M Mustafa Kamal told the reporters on Sunday that the single-digit interest rate on such lending will come into effect from January 01, 2020.

The committee’s decisions will be communicated through issuing a circular or notification, the minister added.

The government had taken a moved to bring down the lending rates to single digit to facilitate job creation and private investment in Bangladesh.

“The interest rate on the industrial loans and working capital loans would have to be in single digit to create jobs and attract investment,” the minister explained.

The single digit interest rate will not be applicable for consumers and housing loans and credit cards in January. “If needed we will include them later,” the minister said.

Some loans already enjoy single-digit interest rate.

“We also want to bring down the interest rate on lending to single-digit from the existing level to facilitate the country’s economic growth,” Syed Mahbubur Rahman, Chairman of the Association of Bankers, Bangladesh (ABB), told media after the meeting.

The central bank may issue a circular in this connection before ending the month of December like earlier.

On April 19, 2009, the central bank asked the commercial banks to fix the interest ceiling on lending in five specific areas at maximum 13 per cent to help mitigate the impact of the ongoing global economic meltdown.

The five areas for which a ceiling on lending rate was fixed at that time were: agriculture, term loan and working capital to large and medium-scale industries, housing, and trade financing.

In 2012, the central bank has withdrawn the cap on lending rate for all sectors and items barring only two — agriculture and export.

With a view to establishing a market-oriented financial system under the Financial Sector Reforms Programme (FSRP), the administered interest rate regime was earlier abolished giving the banks full freedom for selection and management of their credit portfolios.

The central bank of Bangladesh introduced in 1989 a flexible interest rate regime through issuance of a circular in line with the FSRP.

Under the FSRP, the banks are free to charge or fix their deposit and lending rates excepting the rate of interest on export credits.