Don't kill the duck that lays the Golden egg
Thursday, 23 April 2009
Mahbubul Haque Chwodhury
The USA and the member-countries of the European Union (EU) are trying individually and jointly to face the onslaught of economic recession which have already led many countries to massive job cuts in their industries. At the forums of the world's dominant economic powers, the Group of Twenty (G-20), the Group of Eight (G-8) and other groups, the issue of salvaging the economies from the crisis was mooted and called for the International Monetary Fund (IMF)'s enhanced role to accelerate the economic activities. Asian giants like Japan and China, too, are affected. Many industries in China have been closed down. It fears a lower gross domestic product (GDP) growth in the future.
South Asian countries like India and Bangladesh are still not the worst affected ones. Bangladesh earns its hard currency through the export of ready-made garments (RMG), frozen food like shrimps, jute, hide and manpower. Many of the export orders were made long before the recession. Bangladesh is not going to face the jolt right now. Taking advantage of the global recession, the businessmen are pressing the government to provide them with maximum concessionary moratorium on loan repayment and reduction in the rate of interest. It has now been decided that except one or two items, lending rate will be at 13 per cent per annum. There will be no classification obstruction for six months. No down payment will he required for renewal of old loans during the six months' period. It is reported that the bankers will lower the depositor's rate of interest to tie with the rate of interest of loans and advances. Bankers are very right in their decision because they will not spend any money for the depositors.
The depositors who are members of the public have always been targeted. Their savings are not at all safe at the hands of the bankers. If the rate of interest on their savings is lowered, the general public will be hard hit. The depositors are already getting less because all the banks recover value added tax (VAT) on the earned interest. There is no limitation. Whatever may be the profit, one has to pay VAT. Again the private banks very often take service charge at a higher rate. The depositors are already hard hit. Any further reduction in the deposit interest will discourage the depositors to go to other sources like security and bond market.
If the amount of deposits with the banks goes down, the bankers won't be able to lend at the rate of 13 per cent for want of sufficient surplus fund. The Bangladesh Bank has not changed the bank rate. Most central banks in other countries of the world have lowered the rate of interest. Many of our economists on television (TV) talk-shows suggest mobilisation of internal resources to prepare the present national budget. How will the tax payers be able to show the big amount of income when economic meltdown has evaporated the extra income? How will the general public who depend on remittance earnings or receipts from abroad, be able to spend more and contribute to the exchequer?
Out bank capital structure is not well founded. Few banks can absorb any shock. It may happen that many of the opportunity-seekers will try to take the banks' present offer and if money doesn't come back, the banks will face a disastrous situation when government will have to bail them out, too.
(The writer is former General Manager, Agrani Bank)
The USA and the member-countries of the European Union (EU) are trying individually and jointly to face the onslaught of economic recession which have already led many countries to massive job cuts in their industries. At the forums of the world's dominant economic powers, the Group of Twenty (G-20), the Group of Eight (G-8) and other groups, the issue of salvaging the economies from the crisis was mooted and called for the International Monetary Fund (IMF)'s enhanced role to accelerate the economic activities. Asian giants like Japan and China, too, are affected. Many industries in China have been closed down. It fears a lower gross domestic product (GDP) growth in the future.
South Asian countries like India and Bangladesh are still not the worst affected ones. Bangladesh earns its hard currency through the export of ready-made garments (RMG), frozen food like shrimps, jute, hide and manpower. Many of the export orders were made long before the recession. Bangladesh is not going to face the jolt right now. Taking advantage of the global recession, the businessmen are pressing the government to provide them with maximum concessionary moratorium on loan repayment and reduction in the rate of interest. It has now been decided that except one or two items, lending rate will be at 13 per cent per annum. There will be no classification obstruction for six months. No down payment will he required for renewal of old loans during the six months' period. It is reported that the bankers will lower the depositor's rate of interest to tie with the rate of interest of loans and advances. Bankers are very right in their decision because they will not spend any money for the depositors.
The depositors who are members of the public have always been targeted. Their savings are not at all safe at the hands of the bankers. If the rate of interest on their savings is lowered, the general public will be hard hit. The depositors are already getting less because all the banks recover value added tax (VAT) on the earned interest. There is no limitation. Whatever may be the profit, one has to pay VAT. Again the private banks very often take service charge at a higher rate. The depositors are already hard hit. Any further reduction in the deposit interest will discourage the depositors to go to other sources like security and bond market.
If the amount of deposits with the banks goes down, the bankers won't be able to lend at the rate of 13 per cent for want of sufficient surplus fund. The Bangladesh Bank has not changed the bank rate. Most central banks in other countries of the world have lowered the rate of interest. Many of our economists on television (TV) talk-shows suggest mobilisation of internal resources to prepare the present national budget. How will the tax payers be able to show the big amount of income when economic meltdown has evaporated the extra income? How will the general public who depend on remittance earnings or receipts from abroad, be able to spend more and contribute to the exchequer?
Out bank capital structure is not well founded. Few banks can absorb any shock. It may happen that many of the opportunity-seekers will try to take the banks' present offer and if money doesn't come back, the banks will face a disastrous situation when government will have to bail them out, too.
(The writer is former General Manager, Agrani Bank)