Kazi Zahidul Hasan :
Banks have reportedly failed to boost credit in various businesses despite cut in their lending rates because of additional commissions and charges on loans.
This is ultimately discouraging the potential borrowers to borrow loans from banks contributing to a further uncertainty in boosting credit to private sector, insiders said.
“Investors are not getting benefits from the rate cuts, as banks are now charging additional commissions and charges on other accounts, driving away the potential investors from bank finance,” Abdus Salam Murshedy, President of the Exporters Association of Bangladesh (EAB) told The New Nation on Saturday.
Referring to a central bank statistics, he said, the average lending rates in the banking sector stood at 11.18 per cent as on December last year. But the actual interest rates on lending (industrial term loans) would be from 14 to 15 per cent after paying various charges and commissions.
“The lending rates for current capital even go higher to 18 per cent and a similar interest rate is prevailing for the import financing,” he observed.
The EAB leader further said that although the banks are saying that they reduced interest rates. But in reality they are still charging high amount as commissions creating a credit crunch in the financial market.
“The government is apparently stepping up efforts to create a favourable investment climate for both local and foreign investors. But its move goes into the vain due to high lending rates,” he added.
Abdus Salam Murshedy further said, the entrepreneurs are facing challenge to run their industrial units due to lack of uninterrupted power and gas supply. “We have to largely rely on captive power generation for smooth production with additional cost involvement. When such a situation prevails, high borrowing cost is further accelerating our cost of doing business,” he said.
“The central bank should look into the matter immediately because low funding cost can boost private investment which remains sluggish for the last few years,” he said.
“No effective rate cut is yet to be in sight although banks are said to be come out with this,” Abdul Matlub Ahmed, President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) told The New Nation on Saturday.
He said, there are differences between their declared interest rates and effective rates as they are charging additional commissions and other charges on loans undermining demands for private sector credit.
“Higher bank interest rate kept adverse impact of investment which disrupted economic growth in the country in the past,” said Matlub Ahmed.
The FBCCI leader observed that banks are sitting with huge excess liquidity due to lower credit disbursement by them. Credit demands are not growing much as the investors and entrepreneurs do not feel encouraged in investment due to high lending rates coupled with infrastructure bottlenecks.
Sources in the central bank said, banks are now burdened with excess liquidity which reached Tk one lakh crore as on December 31 last year. Of the amount, Tk 30,000 crore is simply remained idle.
“Banks have failed to spur their lending to businesses as a result of poor response from the entrepreneurs, leading to pile up excess liquidity in the financial markets,” a senior executive of a commercial bank told The New Nation on Saturday, preferring anonymity.
He said, “Most commercial banks have already reduced their lending rates to boost credit inflow. But no improvement is in sight due mainly to investor’s apathy in taking bank loans.”
The bank official further said that investment demand for loan has been slowing due to persistent uncertainty over the fresh gas and electricity connections along with the country’s political climate.
Banks have reportedly failed to boost credit in various businesses despite cut in their lending rates because of additional commissions and charges on loans.
This is ultimately discouraging the potential borrowers to borrow loans from banks contributing to a further uncertainty in boosting credit to private sector, insiders said.
“Investors are not getting benefits from the rate cuts, as banks are now charging additional commissions and charges on other accounts, driving away the potential investors from bank finance,” Abdus Salam Murshedy, President of the Exporters Association of Bangladesh (EAB) told The New Nation on Saturday.
Referring to a central bank statistics, he said, the average lending rates in the banking sector stood at 11.18 per cent as on December last year. But the actual interest rates on lending (industrial term loans) would be from 14 to 15 per cent after paying various charges and commissions.
“The lending rates for current capital even go higher to 18 per cent and a similar interest rate is prevailing for the import financing,” he observed.
The EAB leader further said that although the banks are saying that they reduced interest rates. But in reality they are still charging high amount as commissions creating a credit crunch in the financial market.
“The government is apparently stepping up efforts to create a favourable investment climate for both local and foreign investors. But its move goes into the vain due to high lending rates,” he added.
Abdus Salam Murshedy further said, the entrepreneurs are facing challenge to run their industrial units due to lack of uninterrupted power and gas supply. “We have to largely rely on captive power generation for smooth production with additional cost involvement. When such a situation prevails, high borrowing cost is further accelerating our cost of doing business,” he said.
“The central bank should look into the matter immediately because low funding cost can boost private investment which remains sluggish for the last few years,” he said.
“No effective rate cut is yet to be in sight although banks are said to be come out with this,” Abdul Matlub Ahmed, President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) told The New Nation on Saturday.
He said, there are differences between their declared interest rates and effective rates as they are charging additional commissions and other charges on loans undermining demands for private sector credit.
“Higher bank interest rate kept adverse impact of investment which disrupted economic growth in the country in the past,” said Matlub Ahmed.
The FBCCI leader observed that banks are sitting with huge excess liquidity due to lower credit disbursement by them. Credit demands are not growing much as the investors and entrepreneurs do not feel encouraged in investment due to high lending rates coupled with infrastructure bottlenecks.
Sources in the central bank said, banks are now burdened with excess liquidity which reached Tk one lakh crore as on December 31 last year. Of the amount, Tk 30,000 crore is simply remained idle.
“Banks have failed to spur their lending to businesses as a result of poor response from the entrepreneurs, leading to pile up excess liquidity in the financial markets,” a senior executive of a commercial bank told The New Nation on Saturday, preferring anonymity.
He said, “Most commercial banks have already reduced their lending rates to boost credit inflow. But no improvement is in sight due mainly to investor’s apathy in taking bank loans.”
The bank official further said that investment demand for loan has been slowing due to persistent uncertainty over the fresh gas and electricity connections along with the country’s political climate.
