The government must implement comfortable and affordable bank interest rate against loans in order to facilitate entrepreneurs and promote trade and commerce in the country, experts said. Since the government has targeted to achieve the Sustainable Development Goals (SDGs) and transform the country to a developed nation by 2041, and implement the Delta Plan 2100, there is no alternative but to ensure reasonable interest rate for the investors, they added.
They came up with these observations at a roundtable on a paper titled “Interest Rate and Expansion of Bank Credit” organized by the Bangladesh Institute of Bank Management (BIBM) at its auditorium in the city on Tuesday. The country should apply low bank interest rate to encourage entrepreneurs, which will help them invest more to develop the economy, they added.
Md Nehal Ahmed, Professor of BIBM presented a paper on the topic. Other members of the team are faculty member of BIBM Md Abdul Kayum, associate professor of BIBM Mohammed Sohail Mustafa and Rexona Yesmin. Director General of BIBM, Md Nazimuddin said, “The government, the Bangladesh Bank, the commercial banks, and the business community have been debating the issue of interest rate caps which includes both the deposit rate and the lending rate.”
“For the betterment of an economy, it is believed that there should prevail a low interest rate which will ultimately stimulate the aggregate investment in the economy,” he mentioned. BIBM’s Muzaffer Ahmed Chair Professor and former professor of Dhaka University Barkat-e-Khuda said, “Academicians may benefit from the findings of this study as it will add to the body of the existing knowledge in finance.”
“The results will establish how loan sizes relate to interest rates, and therefore, similar or related studies in future could use this study as reference material,” he said. Professor & Director of BIBM, Dr Prashanta Kumar Banerjee said, “Outcome of this study and valuable comments by the discussants will not only enrich the findings of the study, but also give a direction to the regulator as well as the bankers in implementing the recommendations for the betterment of the banking sector of Bangladesh.”
The objective of this study is to examine the effect of interest rate on expansion of credit in commercial banks, a paper writer said. “I strongly believe that this study will be significant if the banks use the knowledge derived from it to better understand the impact of interest rate on loan sizes,” he added. In addition, management and directors of banks could use the results of the study to guide them in coming up with a firm’s credit policy, he informed.
However, a good number of participants including senior bank executives, academicians, media representatives, faculty members of BIBM took part in the roundtable discussion. Helal Ahmed Chowdhury, Supernumerary Professor of BIBM and Former Managing Director of Pubali Bank Limited and Yasin Ali, Former Supernumerary Professor of BIBM spoke among others at the event.
