Credit expansion, rate cuts on table

FE Report | Published: July 21, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

Enhancing private-sector credits and reduction of lending rates for industries are expected to be high on the agenda as bankers meet today to work out means of smooth run of banking operations, officials said.
Besides, the weaknesses in banks' action plan for bringing down their overall capital-market investment within 25 per cent of total capital by July 21, 2016 will be discussed at the meeting.
The central bank is likely to ask the country's top bankers to increase the credit flow to productive sectors, particularly industrial ones, through reasonable cutbacks on the interest rates on loans.
Sources said the advice will be made during the bankers' meeting at the central bank headquarters on the day with Bangladesh Bank (BB) Governor Atiur Rahman in the chair.
The central bank has taken the latest move against the backdrop of downturn in private-sector credit growth in the month of May.
The year-on-year credit growth in the private sector was down at 11.39 per cent in May, from 11.86 per cent in the previous month. It was 11.43 per cent in May 2013.
"We've to increase the credit flow to the private sector for achieving the optimum level of economic growth," a BB senior official told the FE in a preview of what may transpire at the summit meet on the banking-sector matters.
He also said the bankers will have to try to boost the credit flow into the productive sectors through bringing down the lending rates at reasonable level.
Earlier on July 10, the central bank asked 19 commercial banks through sending a letter to cut down the lending rates on large and medium-scale industrial plants reasonably from the existing level of more than 15.50 per cent.
Talking to the FE, another BB official said the central bank earlier had advised the banks not to exceed the level of 15.50 per cent interest rate in lending to the industrial sector.
"The bankers may also expedite the credit flow to un-banked people through introducing new products," the central banker explained.
About the capital-market exposure, the BB official said the central bank wants a time-bound action plan from all banks for complying with its directives limiting their stakes in the capital market.