Banks to raise lending rates from today
Sunday, 8 January 2012
Siddique Islam
The commercial banks are set to raise lending rates on industrial loans and import financing of eight essential food items from today (Sunday) to help reduce the gap between their returns on credits and their cost of funds, bankers said.
Under the latest move, the lending rate on food items will be re-fixed at a maximum of 17 per cent, instead of the existing 12 per cent while term loans to large and medium-scale industries will be increased to a maximum of 16 per cent, in place of existing 13 per cent.
"Our management has already decided to re-fix the lending rates on industrial term loans and food items following the lifting of lending rate cap by the central bank for all sectors and items," a senior official of a leading private commercial bank (PCB) told the FE Saturday.
On January 04 last, the central bank withdrew the cap on lending rate for all sectors and items, barring only two -- agriculture and export -- to facilitate the country's overall economic growth through boosting investment in different fields.
The private banker also said his bank will issue a circular in this connection today (Sunday) after its approval by their board of directors.
Besides, the lending rate ceiling on import financing for eight essential food items was earlier withdrawn from the same day (January 4) through the latest circular relating to fixation of lending rates.
The essentials are: edible oil, gram, pulses, peas, onions, date, fruits and sugar.
The Bangladesh Bank (BB) earlier asked the commercial banks to keep the lending rate on import financing for eight essential food items at a maximum of 12 per cent to help ensure smooth supply of the items to the local market.
"There is no alternative to hiking the lending rates in the sectors and also for food items for reducing the gap between our interest earnings on lending operations and interest payments to depositors that largely reflect our cost of funds," the PCB official noted.
He also said some banks borrowed funds offering deposit rates ranging between 13 per cent and 14.50 per cent recently to meet their growing demand for fresh funds.
The deposit rate reached a maximum of 13.00 per cent on fixed deposits last December while the interest rates on other savings accounts ranged between 1.00 per cent and 12 per cent, according to the central bank statistics.
The banks have been providing loans to large and medium-scale industrial enterprises at lending rates ranging between 11.50 per cent and 13.00 per cent and to small industries, between 10.50 per cent and 18.00 per cent.
"We'll strengthen our monitoring to avoid any irrational behaviour of the banks, relating to fixation on interest rates," an executive director of the BB told the FE.
He also said banks are now free to fix their lending rates, barring a few exceptions.
In 1989, the BB introduced a flexible interest rate regime through issuance of a circular in line with the Financial Sector Reforms Programme (FSRP).
Under the FSRP, the banks are free to charge or fix their deposit and lending rates, excepting the lending rate on export credits.
The commercial banks are set to raise lending rates on industrial loans and import financing of eight essential food items from today (Sunday) to help reduce the gap between their returns on credits and their cost of funds, bankers said.
Under the latest move, the lending rate on food items will be re-fixed at a maximum of 17 per cent, instead of the existing 12 per cent while term loans to large and medium-scale industries will be increased to a maximum of 16 per cent, in place of existing 13 per cent.
"Our management has already decided to re-fix the lending rates on industrial term loans and food items following the lifting of lending rate cap by the central bank for all sectors and items," a senior official of a leading private commercial bank (PCB) told the FE Saturday.
On January 04 last, the central bank withdrew the cap on lending rate for all sectors and items, barring only two -- agriculture and export -- to facilitate the country's overall economic growth through boosting investment in different fields.
The private banker also said his bank will issue a circular in this connection today (Sunday) after its approval by their board of directors.
Besides, the lending rate ceiling on import financing for eight essential food items was earlier withdrawn from the same day (January 4) through the latest circular relating to fixation of lending rates.
The essentials are: edible oil, gram, pulses, peas, onions, date, fruits and sugar.
The Bangladesh Bank (BB) earlier asked the commercial banks to keep the lending rate on import financing for eight essential food items at a maximum of 12 per cent to help ensure smooth supply of the items to the local market.
"There is no alternative to hiking the lending rates in the sectors and also for food items for reducing the gap between our interest earnings on lending operations and interest payments to depositors that largely reflect our cost of funds," the PCB official noted.
He also said some banks borrowed funds offering deposit rates ranging between 13 per cent and 14.50 per cent recently to meet their growing demand for fresh funds.
The deposit rate reached a maximum of 13.00 per cent on fixed deposits last December while the interest rates on other savings accounts ranged between 1.00 per cent and 12 per cent, according to the central bank statistics.
The banks have been providing loans to large and medium-scale industrial enterprises at lending rates ranging between 11.50 per cent and 13.00 per cent and to small industries, between 10.50 per cent and 18.00 per cent.
"We'll strengthen our monitoring to avoid any irrational behaviour of the banks, relating to fixation on interest rates," an executive director of the BB told the FE.
He also said banks are now free to fix their lending rates, barring a few exceptions.
In 1989, the BB introduced a flexible interest rate regime through issuance of a circular in line with the Financial Sector Reforms Programme (FSRP).
Under the FSRP, the banks are free to charge or fix their deposit and lending rates, excepting the lending rate on export credits.