DHAKA, March 18, 2019 (BSS) – Finance Minister AHM Mustafa Kamal today
said that simple interest rates will be charged on all bank loans instead of
present practice of compound rates to lower burden on borrowers.
“In the country, there is a practice of charging compound interest rates
on bank loans, which is against global practice. Now, simple interest rate
will be applied on bank loans,” kamal informed journalists after holding a
meeting with board of directors of all banks and financial institutions at
city’s NEC auditorium.
Kamal identified the practice as a major cause of rising non-performing
loans and weak health of the financial sector.
“Businessmen have to take immense risk for starting off any business. but
compound interest rate put extra burden on them which sometimes leads to
collapse of their business,” he remarked.
The finance minister reiterated that special audits will be conducted in
all banks and financial institutions to verify the assets mentioned in their
balance sheets.
“The cracks in the banking system has now widened to an extent which calls
for a quick response from the policymakers,” he stressed.
In the process, honest and bad businessmen as well as their associates
will be identified to support the good ones while bringing unscrupulous ones
to book.
“We shall apply our all legal jurisdiction to punish the bad businessmen
and their supporters to reclaim the default loans,” Kamal warned.
He clarified that they have no intention to put them behind the bars or
wholesale shutting down of their businesses so that employees of good
business entities do not lose their job.
“We want to rearrange the banking sector based on a win-win situation,” he
said.
Criticizing the practice of providing long-term loans against short-term
deposits, the minister informed that they want to create a bond market soon
for helping long-term financing.
The finance minister requested all not to come up with any kind of bank
related recommendation to him.
The persons well conversant with banking and financial system will be
appointed to the bank boards after taking interviews to ensure proper persons
sit in the boards, he pointed out.
However, he doesn’t think that the health of the banking sector that much
bad as perceived by common people.
As a new financial instrument, the government will soon introduce crop
insurance in Rangpur division and haor areas to lower risk of exposure to
natural disasters.