Banks ‘must lower interest rates to borrowers’

An eminent banker of the country ruled out Sunday any liquidity crisis in banks, saying the problem lies with the distribution of fund.

Managing director of Mutual Trust Bank Ltd (MTB) Anis A. Khan said the banks must offer lower interest rates to borrowers by introducing special products for savings as 75 per cent funds are stuck up in public banks.

The MTB CEO expressed his hope that the cash reserve ratio (CRR) circular effective from Sunday would ease the money market pressure and help contribute towards reducing the interest rates.

His comments came during the launch of the MTB Student Banking services at the Samson H. Chowdhury Auditorium of the MTB Tower in the city.

"The government banks cannot lend. Sonali Bank has an advance-deposit ratio of 40 per cent while Rupali, Janata and Agrani have 50-60 per cent," Anis A. Khan, also the immediate past chairman of Association of Bankers, Bangladesh Ltd, said.

There is no deposit deficit in Bangladesh, rather the problem lies with distribution as 75 per cent funds have been stuck up in government banks, he added.

Referring to the recent provision of keeping 50 per cent of the state-owned enterprises' deposits with the private banks, the noted banker said the money is needed, as the 40 private banks are supporting the credit finance of the country. Many small businesses have grown big with support from both government and private banks, mostly the private banks doing it.

He also said the capability of some private banks has increased for which those banks need deposits and foreign exchange at an affordable rate.

About the present high interest rates of banks, he said he has been an advocate of lower interest rates. The businesses cannot sustain, if the interest rate is 15-16 per cent.

"The banks must have lower interest rates and there should be special products for savings," he said. The government must not distort the interest rate regime of the country by offering 12 per cent of interest rate for the savings certificates.

Decrying the limited sources of long-term funds for banks, he said there are long-term inter-bank offer rates in many countries. But there is no robust money market here like in other advanced economies in the world. There is a total mismatch between the deposit and lending systems. Despite that, the banks are doing quite well.

Mr Khan expressed his hope that with the government's CRR circular effective from Sunday, an additional Tk 100 billion would be available in the system having an effect on the inter-bank interest rates.

While answering questions, he said the banks which have borrowed from other banks to ease their short-term liquidity pressure, may take 3 or 4 months to turn around. The interest rates may come down within another 5/6 months, he added. He, however, declined to comment about restoration of customer confidence in the sick banks.

Additional Managing Director and Chief Operating Officer (COO) Hashem Chowdhury, Deputy Managing Director & Chief Business Officer (CBO) Syed Rafiqul Haq, Head of SME & Retail Banking Tarek Reaz Khan, Head of Retail Business Towfiqul Alam Chowdhury, Group Chief Communications Officer of MTB Azam Khan, along with other senior officials, were also present at the launching ceremony.

MTB Student Banking services include MTB Junior, MTB Graduate, MTB Children Education Deposit Scheme, MTB Education Plan, MTB EDU Finance and MTB Student File Services.

The schemes offer special benefits like discounts for lifestyle benefits, attractive interest rates, discount on student file processing fees and complimentary insurance coverage (MTB Junior & Graduate Account holders will be entitled to complimentary insurance coverage). Group life (GL) coverage offers Tk 10,000 in the event of natural or accidental death of paying parents, for loss of life of the paying parents in any accident -- Tk 5,000 per month for 60 months for the tuition protection of the student, for permanent total disability (PTD) of the paying parents due to accident -- Tk 5,000 per month for 60 months for the tuition protection of the student, and accidental medical reimbursement benefit for student up to Tk 10,000 (only for MTB Graduate account holders).

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