Banks to lower maximum lending rate
Wednesday, 8 April 2009
Siddique Islam
Banks have agreed to a central bank proposal not to charge more than 13 per cent interest on lending in five specific areas to help mitigate the impact of the ongoing global economic meltdown.
The Bangladesh Bank (BB) has also decided to allow rescheduling of loans to four affected export-oriented sectors without any down payment until September 30 this year.
The decisions were taken at a meeting of bankers held at the conference hall of the central bank Tuesday with BB Governor Salehuddin Ahmed in the chair.
"All banks have agreed to charge maximum 13 per cent interest on lending, excepting credit card and consumer loans," the central bank governor told reporters after the meeting.
The country's business community earlier requested the governor of the central bank to take initiatives to reduce lending rates to facilitate investment.
"It's an interim measure. We'll review the revised lending rate," the BB governor said, adding that the revised interest rate on lending would facilitate the country's business activities.
The five areas, for which a ceiling of the interest rate on lending will be fixed, are agriculture, term loans, working capital, housing and trade financing, BB officials said.
In March last, the banks provided loans to large and medium scale industries at interest rates ranging between 11 per cent and 15 per cent and to small industries between 10 per cent and 16.50 per cent.
Interest rates on housing loans range between 11.50 per cent and 16.00 per cent and consumer credits 10.50 per cent and 19.00 per cent.
The banks' lending rates on working capital to large and medium scale industries range between 10.50 per cent and 16.00 per cent and for small industries between 10.50 per cent and 16.50 per cent, the BB data showed.
On March 3, 2008, the Bangladesh Association of Banks (BAB) proposed to the central bank to reduce interest rates on industrial term loans to 14.75 per cent from 16.00 per cent and the interest rates for the production sector to 14.50 per cent from 15.50 per cent.
The central bank has relaxed the existing loan rescheduling rules as a policy support for the four affected export-oriented industries.
"We've relaxed the existing rules allowing loan rescheduling only for specific sectors, which are affected by the global economic crisis, without any down payment for the next six months," the BB governor announced.
Currently, rescheduling requires 10-50 per cent down payment on the overdue loan.
The central bank has already identified four sectors - textile, frozen food, jute and leather - for allowing such relaxation of rules on loan rescheduling on the basis of bank-client relationship, BB officials said.
"We'll issue a circular in this connection soon," a BB senior official told the FE, adding that the central bank took such a move to help the export-oriented sectors through providing financial support continuously.
At the meeting, the bankers have been asked to boost investments in thrust sectors including agriculture and small and medium enterprises (SMEs).
The meeting also discussed the overall inflow of remittances from the European Union (EU), particularly the United Kingdom (UK), aiming to sustain the flow from the region.
The central bank took the latest move against the backdrop of a downward trend in flow of remittances from the UK in February last, central bank officials said.
The inflow of remittance from the UK decreased to $54.72 million in February from $67.54 million of January while the flow of remittance from Italy came down to $11.81 million from $16.20 million, the BB data showed.
"We've asked the bankers to move aggressively for increasing the inflow of remittance," Mr. Ahmed said, adding that the central bank will launch a drive to make attractive the US dollar investment bond and the US dollar premium bond among the Non-Resident Bangladeshis (NRBs) across the world.
"It's a positive sign. But we have to do it judiciously," Chairman of the Association of Bankers, Bangladesh (ABB) and Managing Director of the City Bank Limited K Mahmud Sattar told reporters while giving his reaction to the relaxation of loan rescheduling rules.
He also said implementation of the 13 per cent lending rate ceiling for these areas will be very challenging for the banks. "But we have to do it in the national interest," he noted.
Banks have agreed to a central bank proposal not to charge more than 13 per cent interest on lending in five specific areas to help mitigate the impact of the ongoing global economic meltdown.
The Bangladesh Bank (BB) has also decided to allow rescheduling of loans to four affected export-oriented sectors without any down payment until September 30 this year.
The decisions were taken at a meeting of bankers held at the conference hall of the central bank Tuesday with BB Governor Salehuddin Ahmed in the chair.
"All banks have agreed to charge maximum 13 per cent interest on lending, excepting credit card and consumer loans," the central bank governor told reporters after the meeting.
The country's business community earlier requested the governor of the central bank to take initiatives to reduce lending rates to facilitate investment.
"It's an interim measure. We'll review the revised lending rate," the BB governor said, adding that the revised interest rate on lending would facilitate the country's business activities.
The five areas, for which a ceiling of the interest rate on lending will be fixed, are agriculture, term loans, working capital, housing and trade financing, BB officials said.
In March last, the banks provided loans to large and medium scale industries at interest rates ranging between 11 per cent and 15 per cent and to small industries between 10 per cent and 16.50 per cent.
Interest rates on housing loans range between 11.50 per cent and 16.00 per cent and consumer credits 10.50 per cent and 19.00 per cent.
The banks' lending rates on working capital to large and medium scale industries range between 10.50 per cent and 16.00 per cent and for small industries between 10.50 per cent and 16.50 per cent, the BB data showed.
On March 3, 2008, the Bangladesh Association of Banks (BAB) proposed to the central bank to reduce interest rates on industrial term loans to 14.75 per cent from 16.00 per cent and the interest rates for the production sector to 14.50 per cent from 15.50 per cent.
The central bank has relaxed the existing loan rescheduling rules as a policy support for the four affected export-oriented industries.
"We've relaxed the existing rules allowing loan rescheduling only for specific sectors, which are affected by the global economic crisis, without any down payment for the next six months," the BB governor announced.
Currently, rescheduling requires 10-50 per cent down payment on the overdue loan.
The central bank has already identified four sectors - textile, frozen food, jute and leather - for allowing such relaxation of rules on loan rescheduling on the basis of bank-client relationship, BB officials said.
"We'll issue a circular in this connection soon," a BB senior official told the FE, adding that the central bank took such a move to help the export-oriented sectors through providing financial support continuously.
At the meeting, the bankers have been asked to boost investments in thrust sectors including agriculture and small and medium enterprises (SMEs).
The meeting also discussed the overall inflow of remittances from the European Union (EU), particularly the United Kingdom (UK), aiming to sustain the flow from the region.
The central bank took the latest move against the backdrop of a downward trend in flow of remittances from the UK in February last, central bank officials said.
The inflow of remittance from the UK decreased to $54.72 million in February from $67.54 million of January while the flow of remittance from Italy came down to $11.81 million from $16.20 million, the BB data showed.
"We've asked the bankers to move aggressively for increasing the inflow of remittance," Mr. Ahmed said, adding that the central bank will launch a drive to make attractive the US dollar investment bond and the US dollar premium bond among the Non-Resident Bangladeshis (NRBs) across the world.
"It's a positive sign. But we have to do it judiciously," Chairman of the Association of Bankers, Bangladesh (ABB) and Managing Director of the City Bank Limited K Mahmud Sattar told reporters while giving his reaction to the relaxation of loan rescheduling rules.
He also said implementation of the 13 per cent lending rate ceiling for these areas will be very challenging for the banks. "But we have to do it in the national interest," he noted.