Banks ought to adopt two strategies in the main for bringing down the lending rate that would especially give a spur to investments in the private sector and prove to be good for them as well. First, with substantial recovery of the classified loans, they would be in a position to lower the lending rate. Thus, it is important to go all out to put a pace on activities aimed at ample recovery of classified loans. To this end, asset management companies are needed to speed up the recovery of classified loans. The gaps in the law must be bridged to enable effective functioning of the financial and bankruptcy courts. Secondly, the present high rate of dividends that the banks are giving their share holders are also preventing them from lowering the lending rate. Thus, the banks' management should also consider the lowering of the rate of dividends on their shares. The relatively new or third generation banks carry little or no such burden of classified loans. Thus, it is not understandable why they too charge similar high rates of interest on loans. Bangladesh Bank should tell the management of the new banks to lower their interest rates on loans.
Government will have to give urgent attention to many problems in national life. But in order to invigorate the economy it will necessarily have to take some decisive steps. The lowering of the costs of funds or reducing the charges on loans by the banks and financial institutions has been the singular long-standing major demand of the private sector. The central bank is expected to play its part positively and early in relation to this demand by persuading the commercial banks to lower their interest rates so that investment activities in the economy can be really stimulated.
Nurul Huda
Gulshan-2, Dhaka
Banks should decrease the cost of their funds
FE Team | Published: May 07, 2010 00:00:00 | Updated: February 01, 2018 00:00:00
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