Ahammad Parvej Khan
The single-digit interest rate on bank loans would mainly benefit corporate clients, but consumer loans, retail loans and other similar categories of credit seekers will not get any relief from banks in this regard, say bankers and analysts.
“Reducing the bank rate to single-digit was a must for overall development of the economy, now we are a global player, so the interest rate in neighboring countries, or what is going on globally, should be considered seriously for the survival of our entrepreneurs and manufacturers in the competition,” they said.
Md. Shafiul Azam, Managing Director and CEO of Madhumati Bank, Limited expressed his wholehearted support to the spirit of reducing interest rate on bank loan.
“I firmly believe, such a high rate of interest on bank loans exists nowhere in the world. The economy of our country is now very vibrant, and all development indexes are in the upward trend, so now we are competing globally, not only are we exporting RMG products, but also many other products and commodities,” Azam added.
Referring to big corporate houses trading globally, Azam said “Our famous energy sector organization, ‘Energypac’ is exporting transformers to India, ‘Hatil’ a furniture giant in the country, has a good number of outlets in different Indian states including Siliguri, Bihar, and Kolkata. So, they have to perform globally, and if the bank rate here differs from those in neighboring countries, it will be very difficult for them to survive”.
As a regulatory body, he said, Bangladesh Bank cannot put force on following any certain rate of interest in a free market economy, but Bangladesh Bank has advised all banks to take steps as per the decision of BAB and ABB.
“What I think is that the single-digit rate is not something to be implemented instantly. It will be done gradually, and from last Monday, we have instructed implementation of single-digit rate in some particular cases.
I believe, it will be difficult for the old banks to execute single-digit because they have huge non-performing assets, and comparatively the NPL is much less in new generation private sector banks,” Azam added.
Some of the commercial banks have already brought down their lending rate to 9 percent, and fixed the deposit rate at 6 percent from the beginning of the current month of July, while some are yet to begin the process.
The rates for lending were, however, charged at between 14 and 15 per cent, while the average of deposit rate ranges between 9 and 10 per cent.
Nazrul Islam Mazumder, chairman of the BAB told reporters after a meeting last month that they decided to lend at 9 per cent, and pay 6 percent interest to depositors for three months tenure from July 1.
“Through the decision of bringing down the interest rates to single digit, a long-cherished demand of the country’s entrepreneurs has come true,” said the President of Dhaka Chamber of Commerce and Industries (DCCI), Abul Kashem Khan.
“This would definitely help business grow, especially the big entrepreneurs, because their profit margin is usually low,” Khan added.
He said, at present private sector investment to GDP ratio is 23 percent, but if we want to increase it 1 percent more, Tk 25,000 crore is to be invested in a year. The government has set a target to increase private sector investment to GDP ratio at 25.15 percent, so all these are related to encouraging and inspiring private sector investment, and that is why the decision of bringing down the interest rate has been very effective and timeworthy, he said
Md. Abdul Halim Chowdhury, CEO and Managing Director of Pubali Bank Limted, told Bangladesh Post, basically interest rate depends on cost of fund, when cost of fund comes down, interest rate automatically reduces .
He said, the Bangladesh Bank usually never instructs the banks directly about reduction of interest rate, but sometimes it advises them unofficially to keep the interest down.
President of Real Estate and Housing Association of Bangladesh (REHAB), Alamgir Shamsul Al-Amin said, the decision of reducing interest rate will certainly have a positive impact on the country’s economy.
Entrepreneurship, investment, industrialization all will get a boost through the decision.
“But we from the REHAB proposed to bring down the interest rate on housing loan to 8 to 8.5 percent because this will tremendously help in the owning of a flat by middle or lower income segment of people,” the REHAB President added.
Md. Nurul Absar, Branch Manager, The City Bank Limited, Moghbazar Branch told Bangladesh Post, they are yet to get any instruction from Bangladesh Bank or their head office regarding implementation of single-digit rate of interest.
Regarding personal loan, he said “ I don’t believe that the rate of personal loan will come to single-digit, and in fact, it is not possible”.