DHAKA, June 20, 2018 (BSS)- Economists and business people have expressed
mixed reactions over the initiative of Bangladesh Association of Banks (BAB)
to bring down the lending rate to single digit.
The association of private commercial banks at an emergency meeting today
decided to bring down the lending rate to single digit and deposit rate of
the three months tenure at six percent from July 1, the beginning of fiscal
year 2018-19 (FY19).
Talking to BSS, former advisor to Caretaker Government Dr AB Mirza Azizul
Islam welcomed the decision of BAB, saying that the initiative will help to
boost private sector’s investment that will ultimately help country’s
economic growth to a sustainable level.
“As the government has offered several incentives to the banking sectors
recently, the lending rate should come down in the single digit,” he added.
Recently, BB has re-fixed the CRR at 5.5 percent for commercial banks on
bi-weekly average basis from 6.5 percent. To tackle the liquidity crisis in
the sector, the government has also taken a decision to allow state agencies
to deposit 50 percent of their funds rather than 25 percent in private banks.
Finance minister AMA Muhith has also proposed to reduce the corporate tax
rate for banks and Financial Institutions (FIs) by 2.5 percent in the budget
for FY19.
Azizul Islam said there is a scope for banks to cut the lending rate as the
government has already reduced the CRR rate, which will help to meet the
liquidity crisis in the banking sectors, but side by side, the banks should
not lower the deposit rate.
Former Bangladesh Bank Governor Salehuddin Ahmed said taking initiative to
lower lending rate does not go with the market economy as the interest rate
depends on market.
He said lowering the deposit rate is also not logical as the inflation is
around six percent.
“Banking industry should reduce their operating cost and other expenses . .
. they should be more active to reduce the huge amount of Non Performing Loan
(NPL). If they can do so, the interest rate will normally go down,” he added.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur said
BAB’s decision does not match with the market economy. “So, I am doubtful
about the implementation of the initiative,” he said, adding that the
government has taken decision to reduce the corporate tax for banks and FIs
by 2.5 percent in the next fiscal.
For reducing the corporate tax, the government will lose around Taka 500
crore to Taka 700 crore revenue in a year, said Ahsan H Mansur.
Welcoming the initiative of BAB, Acting President of the Federation of
Bangladesh Chambers of Commerce and Industry (FBCCI) M Muntakim Ashraf said
single digit lending rate will accelerate further the country’s both local
and foreign investments.
“It is a good decision. We have demanded it in many dialogues, seminars and
conferences. The initiative will boost up the country’s economy,” he added.