Low interest rate won't affect bank business: BB chief
Sunday, 19 August 2007
Bangladesh Bank Governor Dr Salehuddin Ahmed Saturday expressed the hope that the commercial banks as well as the businessmen would extend their cooperation to the government efforts to contain prices of essentials, reports UNB.
"The low interest rate (as directed by the central bank) won't affect the banks' businesses," he told reporters after a memorial lecture at the Asiatic Society of Bangladesh.
The Bangladesh Bank governor said many banks usually open 2-3 percent of their total letters of credit (L/Cs) for the import of food items while some others even do not open L/Cs for food import.
Barrister Syed Ishtiaq Ahmed Foundation organised the memorial lecture titled 'The roadmap to financial system standards for middle income Bangladesh' held at the Asiatic Society of Bangladesh auditorium with Prof. Sirajul Islam in the chair.
Bangladesh Bank has asked the commercial banks to finance import of some essential items at 12 percent interest, instead of the usual rate of 14-17 percent, as part of the government efforts to curb the rising prices.
The bankers at a meeting on Thursday reached consensus that they would follow the central bank's instruction in the greater interest of the country considering the sufferings of the people due to the flood. But at the same time they urged the government to take a commitment from the business community to reduce the prices of essentials to a certain extent.
"I hope, the businessmen will cooperate in this regard," Dr Salehuddin said, adding: "the monetary policy stance is not so important at this moment as the welfare of the people."
At the memorial lecture, the Bangladesh Bank Governor expressed the hope to achieving 7 percent GDP and become a 'middle income group country' by the next decade as the policy strategy has been initiated and reform programmes undertaken by the government.
He said: "The policy strategy that has been initiated and the reform programmes undertaken by the government would not only help the economy to grow by 7 percent per annum in the medium term but also pave the way for Bangladesh to become a member of the 'middle income group country' by the end of the next decade."
Dr Salehuddin said faster GDP growth consistent with poverty reduction goals cannot be met unless the extent and quality of financial intermediation in Bangladesh advances significantly.
"In particular, this would require a more competitive banking and non-banking financial sectors capable of reaching out to all sections of the community, rural and urban, catering to all types of marketable financial services."
To achieve the target, he said it would be necessary to enforce stricter adherence to regulatory guidelines regarding provisioning and capital adequacy, above all, to thoroughly restructure the national commercialized banks and specialized banks so as to put the non-performing loan problems behind and indeed go one step further to implement BASEL II.
"A cautionary note for BASEL II implementation is that whether the norms envisaged therein will slow down the process of financial inclusion effort in a country like Bangladesh."
The Bangladesh Bank Governor emphasized on bringing poor and asset-less people, the so-called unbanked people, in the financial system. "From the point of view of a healthy and egalitarian pattern of economic development which is possible by bringing the poor and asset less (so-called unbanked) people within the financial system, the whole approach should be based on calibrated balancing of prudential norms and more genuinely inclusive financial services," he said.
He added: "Merger of small banks into larger and stronger entities would be the way forward as in other developed financial large projects though the modalities of syndication loan with minimum risk."
Dr Salehuddin said that reorganization and restructuring of the broader financial sector (inclusive of NBFIs, merchant banks and insurance) might involve suitable merger and consolidation. "These issues need to be explored in a transparent manner."
"The low interest rate (as directed by the central bank) won't affect the banks' businesses," he told reporters after a memorial lecture at the Asiatic Society of Bangladesh.
The Bangladesh Bank governor said many banks usually open 2-3 percent of their total letters of credit (L/Cs) for the import of food items while some others even do not open L/Cs for food import.
Barrister Syed Ishtiaq Ahmed Foundation organised the memorial lecture titled 'The roadmap to financial system standards for middle income Bangladesh' held at the Asiatic Society of Bangladesh auditorium with Prof. Sirajul Islam in the chair.
Bangladesh Bank has asked the commercial banks to finance import of some essential items at 12 percent interest, instead of the usual rate of 14-17 percent, as part of the government efforts to curb the rising prices.
The bankers at a meeting on Thursday reached consensus that they would follow the central bank's instruction in the greater interest of the country considering the sufferings of the people due to the flood. But at the same time they urged the government to take a commitment from the business community to reduce the prices of essentials to a certain extent.
"I hope, the businessmen will cooperate in this regard," Dr Salehuddin said, adding: "the monetary policy stance is not so important at this moment as the welfare of the people."
At the memorial lecture, the Bangladesh Bank Governor expressed the hope to achieving 7 percent GDP and become a 'middle income group country' by the next decade as the policy strategy has been initiated and reform programmes undertaken by the government.
He said: "The policy strategy that has been initiated and the reform programmes undertaken by the government would not only help the economy to grow by 7 percent per annum in the medium term but also pave the way for Bangladesh to become a member of the 'middle income group country' by the end of the next decade."
Dr Salehuddin said faster GDP growth consistent with poverty reduction goals cannot be met unless the extent and quality of financial intermediation in Bangladesh advances significantly.
"In particular, this would require a more competitive banking and non-banking financial sectors capable of reaching out to all sections of the community, rural and urban, catering to all types of marketable financial services."
To achieve the target, he said it would be necessary to enforce stricter adherence to regulatory guidelines regarding provisioning and capital adequacy, above all, to thoroughly restructure the national commercialized banks and specialized banks so as to put the non-performing loan problems behind and indeed go one step further to implement BASEL II.
"A cautionary note for BASEL II implementation is that whether the norms envisaged therein will slow down the process of financial inclusion effort in a country like Bangladesh."
The Bangladesh Bank Governor emphasized on bringing poor and asset-less people, the so-called unbanked people, in the financial system. "From the point of view of a healthy and egalitarian pattern of economic development which is possible by bringing the poor and asset less (so-called unbanked) people within the financial system, the whole approach should be based on calibrated balancing of prudential norms and more genuinely inclusive financial services," he said.
He added: "Merger of small banks into larger and stronger entities would be the way forward as in other developed financial large projects though the modalities of syndication loan with minimum risk."
Dr Salehuddin said that reorganization and restructuring of the broader financial sector (inclusive of NBFIs, merchant banks and insurance) might involve suitable merger and consolidation. "These issues need to be explored in a transparent manner."