Abu Sazzad :
Country’s business community hesitates to invest in the new projects due to the commercial bank’s high lending rate. Commercial banks are still charging interest at high rates on their credits despite the fact that they have continued to cut the same on their deposits.
Talking to the reporter, Bangladesh Bank Executive Director M Mahfuzur Rahman said that the central bank had earlier put pressure on local banks to reduce their lending rates.
The banks will gradually implement the instruction of the central bank to cut their lending rates,” said the executive director and added that BB would monitor the situation to take steps accordingly.
According to the banking expert, the high lending rates have contributed to accumulation of a large amount of idle money in the banks as the prospective investors cannot afford to avail loans at higher rates.
The average lending rate at all commercial banks increased slightly to 13.4 percent in February from 13.39 percent in January while average interest rate on deposits decreased to 8.34 percent from 8.40 percent during the same period of last year, according to Bangladesh Bank data. The difference of interest between the lending and deposit rates is above five per cent in February.
“The gap between average lending and deposit rates at 19 local commercial banks went up to 5 percent in February from 4.99 percent in the previous month due to increase in the lending rates,’ said a banker.
Foreign loan inflow increased significantly in the last two years as big entrepreneurs were keen to take foreign loans because the rate of interest is fewer.
The excess liquidity in the banking sector has increased by Tk One lakh crore by the end of December 2014. During the same month of the last year it was about Tk 80 thousand crore.
It resulted in an average interest rate in the call money market of around 7.78 percent during the last year compared with an average of above 10 percent in the previous year.
Excess liquidity piled up in the banking sector during the last one year due to want of investment.
The banker said, “Banks were supposed to cut their lending rates in December, 2013. Though some banks have reduced their lending rates, most of the banks could not comply with the obligation due to an increase in their maintenance expenses.”
The Federation of Bangladesh Chamber of Commerce and Industries (FBCCI) Vice-President Md Helal Uddin said, business community are hesitating to invest at large scale project due to high lending rate of the financial institutions and political uncertainty of the country. “We are going in a ‘wait and see’ policy and we have nothing to but we want to contribute something to the growth of the economy.” He underscored the need for a business friendly environment to move the economy forward.
