Perhaps now the spread?

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Mahmudur Rahman
For some time now businesses and consumers have been airing their concern about high rates of interest for loans and excessive bank charges. On the other hand, banks have quickly pointed out that they are returning significant profits to their shareholders, providing high rates of interest for deposits and running a business that has done wonders for employment and all of this without help.
Former Finance Minister Saifur Rahman had on more than one occasion been quite uncharitable in his criticism of the banks suggesting they were looking for excessive profits from minimum investments. He was also critical of their not supporting loans for industrialization but concentrating on personal loans and trade. He was perhaps a little harsh but there was logic in some of what he said. Since those days banks have moved into small and medium enterprise (SME) loans as well as looking for syndicated loans themselves.
The soft-spoken current Finance Minister is also realistic in suggesting that banks do need money to fund the cost of their operations and thereby arguing for the spread between deposit rates and loan interest. Smart management is all about arriving at a spread that serves the consumer as well as the bank. However, following the Bangladesh Bank circular capping interest on all loans barring personal and credit cards at 13%, the bankers have come out with a statement that the maximum rate against deposits will now be capped at 10% with punitive action against anyone violating this 'agreement'. There of course lies the issue. How acceptable would such a cartel decision have been if a group of traders got together to 'fix' minimum or maximum prices of a consumer product?
If different banks provide different spreads, some argue it goes against competition. On the other hand, such a phenomenon allows bank management to get their priorities straightened out. Will such a decision also lead to a consensus on bank charges and such? Or are banks merely maintaining a spread as close to their previous range as possible.
A Director of a bank candidly admitted that as a businessman even he was finding it difficult to accept that with an investment of Tk 5.0 million (50 lakh), he was raking in Tk 20.0 million (2.0 crore) as profit. This is when one remembers what the former finance minister had said.
There's quite a scramble out there and it will be interesting to see where it all leads. As a profitable sector no one wants the banking sector to lose out or decline but it's also time for the banks to live up to their promise of service to the consumer. (The writer is a former Head of Corporate and Regulatory Affairs of British American Tobacco, Bangladesh and former Chief Executive Officer of Bangladesh Cricket Board. He may be reached at e-mail: mahmudurrahman@gmail.com)