Interest rates on some particular industrial loans should be brought down to single digit, recommended a committee formed over interest of bank loans, said officials.
Interest rates of industrial loans of some particular sectors where increase of investment is expected to make direct impact on the economic growth should be brought down to single digit, recommended the Bangladesh Bank’s committee on reduction of interest rate in its final report.
The committee was formed as per the instruction of Finance Minister AHM Mustafa Kamal.
Sources said the committee submitted its final report to BB governor Fazle Kabir on Wednesday night.
The seven-member committee headed by BB deputy governor SM Moniruzzaman was formed on Sunday night, to make recommendations on reduction of interest of bank loans.
The committee also stressed on implementation of the government decision of keeping 50 percent of government deposit in private banks.
In this regard, Chairman of Agrani Bank Zaid Bakht said that the recommendation to reduce interest rates is almost final. It will be handed over to the governor in no time. The recommendations would be submitted keeping the finance minister's instructions in mind, he said.
In a recent meeting, the finance minister said,” forget about the nine-six formula”. From now on, there will be no interest rate of 6% on deposits and 5% on loans. The new method will reduce interest rates.
The minister further said, interest rate on industrial loan cannot be higher than 9 percent in Bangladesh. Bangladesh Bank will issue a notification immediately in this regard.
Already, Bangladesh Bank has conducted special inspection in all banks to find out which banks have disregarded the single digit directive and the inspection report says that almost all non-state-owned and non-state-owned banks have been found to have violated the directive of single digit.
According to bank sources, Bangladesh Bank will soon issue a notification on the interest rate of 5 percent in industrial loans. These will include current capital loans, project loans, and large loans from the industrial sector. However, the central bank has already started working on the issue.
Prime Minister Sheikh Hasina has already instructed to raise the interest rate of the loan to 5 percent or to reduce it to single digit. But even then, private banks are not doing so.
The Governor of Bangladesh Bank also called on the Managing Director (MD) of the banks and gave special instructions in this regard. Bangladesh Bank and the National Board of Revenue (NBR) have given such special exemptions to the banks in terms of reducing interest rates. But even with these benefits, they have not lowered the interest rate into single digits.
For the first time, at a meeting of the Awami League Advisory Council held at Ganabhaban on May 5 last year, the Prime Minister directed the concerned authorities to reduce the interest rates of the loan into single digits.
The meeting was attended by a member of the Awami League advisory body, former president of the FBCCI, a leading business organization and chairman of Standard Bank Kazi Akram Uddin Ahmed.
Later, according to the directive, the then finance minister and the present governor of Bangladesh Bank took various initiatives to reduce the interest rate of the loan. A letter was also sent from the Prime Minister's Office to the Ministry of Finance. Following this, the finance minister gave a letter to the Bangladesh Bank.
The Governor of Bangladesh Bank held separate meetings with the commercial banks and financial institutions and gave them a message to reduce the interest rates of the loan. At the same time, Kazi Akram Uddin Ahmed also gave the message to the bank's directors. In light of this, on June 27 last year, at the meeting of the Association of Banks (BAB), the directors of the private banks, announced that the maximum interest rate for all loans would be reduced to 6 percent and the interest rate for the six-month deposit to 5 percent. They said the interest rate would be effective from July 1 last year. However, from July 4, the decision has not been implemented by any of the four government banks. Later, some private banks cut interest rates to 5 percent. But most banks have not implemented it.