Bangladesh Bank (BB) has ordered to bring down the lending rate to 9 percent and also to give it effect from April 1 of the current year. BB in a circular released on Monday (Feb.24) said this.
Banks can charge maximum 2 percent additional interest or penalty for loans that will turn non-performing after the new rates take effect. They will not be allowed to levy any fees or charges other than the interest and the penalty.
The central bank has kept the 7 percent lending rate for export financing unchanged.
The banks had been scheduled to implement new lending rate ceiling for industrial loans at 9 percent and deposit interest rate ceiling at 6 percent from the first day of the year. But the government had changed the decision and said the new rates will be effective for all sectors bar credit cards from Apr 1.
Finance Minister AHM Mustafa Kamal had said they changed the decision on the sectors following instructions from Prime Minister Sheikh Hasina.
The new date to implement the new rates was set following a request from the bankers who sought time so that some of both short-term and long-term deposits with more than 6 percent interests can mature, according to the finance minister.
The business community has long called for interest rates on lending and deposit to be fixed at 9 percent and 6 percent respectively.
Sheikh Hasina, too, has called on banks to slash lending rates on many occasions to little avail though the banks were receiving different facilities to cut the rates.
But economists think forcing a decision will not work well. They argued that interest rates should be set by the market while everything in an open market economy like Bangladesh depends on how the market behaves.
According to BIDS currently the banks gives 9 to 11 percent interest against deposits while they are distributing credits at the rate of 13 to 15 percent.