Dhaka’s Banks start executing single digit lending rate

Banks in the countries started implementing single digit 9 percent interest rate for all kinds of loans except credit cards in compliance with the government directives.

Banking industry sources said all private banks started implementing the order from Wednesday (April 1) while state-owned banks began it much earlier.

“We’ve started executing the Bangladesh Bank’s order from today (Wednesday) on single digit bank rate,” Syed Mahbubur Rahman, Managing Director and CEO of the Mutual Trust Bank, told UNB.

He, however, said it may take this month to fully implement the new rate for all kinds of lending designated under the BB order.

The Bangladesh Bank on February 24 in a circular asked all scheduled banks to charge highest 9 percent interest for all types of lending, barring credit cards, from April 1 to help expand business and economy.

It said current high bank interest rate regime was weighing on the country’s small, medium and large industries badly.

“Due to high interest, cost of doing business is escalating and industries are losing their competitiveness,” the circular noted.

According to the circular, the directives will not be applicable for classified loans as well.

A 2 percent additional interest could be charged by banks in case any borrowers enjoying the 9 percent interest became defaulters, added the circular.

It said the existing 7 percent rate on export-oriented sector would remain unchanged.

Earlier, on December 30 last year, Finance Minister AHM Mustafa Kamal said the lending rate would be as high as 9 percent and deposit rate maximum 6 percent with effect from April 1.

He made the announcement after a meeting with bank directors and chief executives.

“We wanted to implement the single digit interest rate from January 1. But Prime Minister Sheikh Hasina wants it for all loans, so we decided it should be implemented from April,” Kamal said.

On January 20, the finance ministry instructed the autonomous, semi-autonomous and government companies to keep 50 percent of their surplus funds at 6 percent interest rate with private lenders and the remaining half of their deposits will go to state banks, which can offer no more than 6 percent interest to facilitate banks to charge 9 percent for loans from April 1.

The central bank, however, refrained from imposing the 6 percent deposit rates across the board, backtracking on its earlier decision taken in a meeting with stakeholders, including bankers, BB and the finance ministry.

source: UNB