Dhaka, Bangladesh (BBN)- The interest on lending should be lowered further in line with the declining trend of inflationary pressures on the economy, the Metropolitan Chamber of Commerce and Industry (MCCI) said on Sunday.
The country's premier trade-body issued the statement, making its formal comments on the monetary policy statement (MPS) of Bangladesh Bank (BB), unveiled on January 29.
"BB should encourage the commercial banks to devise ways to reduce the decline in the inflation in the past three years," the MCCI said.
Pointing out that the inflation fell by 5.50 per cent in the past three years when the banks cut their interest by only 1.0 percent, the MCCI said the existing average lending rates of 12.0-13.0 percent would 'dampen investment'.
The MCCI also reiterated its recommendation for setting up a functional secondary money market as an alternative source for borrowing money by the private sector.
Referring to the MPS for the rest six months of the current 2014-15 financial year (FY15), MCCI said the BB set the target of private sector credit growth at 15.5 per cent for the next six months, which was higher than the 12.7 per cent growth till November. The chamber, however, said the credit growth would go up should there be political stability and proper infrastructure.
The statement praised many policy measures of the MPS, including the target of low inflation while help propelling economic growth, but advised that there should be more support from banks to agriculture sector so farmers could overcome the losses to the going blockade.
"BB has revised the lending rate ceiling for agriculture downward from 13.0 percent to 11.0 percent, but much more to be done, particularly at this time when the farmers cannot sell their products due to ongoing blockade," it noted.
The MCCI urges upon the BB to initiate measures that would make new tranche of agriculture credit to farmers at the earliest to help them recover these loss.
BBN/SSR/AD-08Feb15-9:06 pm (BST)