Dhaka, Bangladesh (BBN)– The central bank of Bangladesh will issue a directive immediately capping the interest rates on deposits and lending at 6.0 per cent and 9.0 percent respectively, Finance Minister A H M Mustafa Kamal said on Sunday.

“The Bangladesh Bank (BB) will issue a circular in this connection immediately,” the finance minister said while replying to a query at a briefing at the central bank headquarters in Dhaka.

The briefing held following his meeting with the chairmen and managing directors of the country’s private commercial banks (PCBs).

Sixteen banks including seven state-owned banks and nine PCBs have already brought down their interest rates on lending to single digit, according to the ministry.

He also said that all the PCBs had assured him of bringing down their interest rates on both lending and deposit to the desired level.

“We’ll meet with the PCBs on quarterly basis,” the finance minister added.

The next meeting with the PCBs will be held by the end of September or October next, according to the minister.
The minister will also meet with the chairmen and managing directors of the country’s non-banking financial institutions (NBFIs) soon to review overall situation on the sector, he noted.

At the meeting, top private bankers alleged that they were not getting deposit from the state-owned enterprises (SoEs) as per the announced policy of the government, according to sources.

The government earlier allowed the state entities to deposit 50 per cent of their funds with the PCBs, up from the previous ceiling of 25 per cent to facilitate increase the flow of liquidity particularly into the private banks.

The minister assured at the meeting to look into the matter.

The CEO also said the senior bankers wanted to know how the PCBs bring down their lending at single digit while collecting term deposit at a minimum 10 per cent interest rate.

Earlier on June 20 last calendar year, Bangladesh Association of Banks (BAB) decided to bring down the interest rates on both lending and deposit at 9.0 per cent and 6.0 per cent respectively from July 01.

At the meeting, the minister emphasized reducing the volume of non-performing loans (NPLs) through strengthening recovery drives, saying “We do not want the banks to clean their balance sheets by writing off loans.”

The minister also informed the meeting that work is on to form asset-management companies that will help reduce the amount of NPLs, meeting sources said.

Bankruptcy act will also be amended shortly, Mr. Kamal added.

Currently, the central bank is now working to amend three acts — Banking Companies, Bankruptcy and Artha Rin Adalats (Money Loan Courts) for settling the cases relating to default loans within the shortest possible time.

Meeting sources, however, said the BAB, a forum of private banks’ sponsors, demanded relaxing the provisioning requirement against the bad loans that will be rescheduled under latest central bank policy.

Under the existing policy, a bank has to keep aside 100 per cent provisioning for bad loans.

Among others, BB Governor Fazle Kabir, Senior Secretary of Financial Institutions Division under Ministry of Finance Ashadul Islam, BB Adviser SK Sur Chowdury and Deputy Governors of the central bank SM Moniruzzaman and Ahmed Jamal also attended the meeting.