Badrul Ahsan :
The state-owned Janata Bank Ltd has planned to bring down interest rate on its lending to a single digit gradually by the year 2016 because of huge amount of liquidity in hand and poor demand for money.
Besides, serious competition among the local private sector financiers and the overseas investors have also contributed to the decision, sources at the bank said. “We have already started slashing the rate of interest on lending and have planned to bring down the rate to a single digit step by step by the end of year 2016,” said Md. Abdus Salam, CEO and Managing Director at a press meet in the city Wednesday.
“Lending rates of all the commercial banks’ have come down drastically in recent times due to a poor demand for money and a decline in their cost of funds. So, we are compelled to slash the rate to stay competitive in the market,” he said.
As part of our initiative, we have recently cut down the lending rate from around 16 per cent to 13 percent and in some cases the rate has been brought down to even 10 percent, Salam informed.
Although Abdus Salam did not disclose the figure of idle money with the bank, he said, the high degree of liquidity in banks is gradually becoming headache for the lenders.
However, economists have expressed their mixed opinion on the issue.
Some of them have hailed the decision saying the initiative will help reduce inflow of private sector foreign loan and the others expressed their doubt whether the initiative would attract investors until the government ensures sufficient gas and electricity supply and a rich infrastructure.
“Scarcity of gas and electricity and poor infrastructure, including roads, are some of the reasons behind the declining demand for loans. So, only reducing lending rate may not work well,” Dr. Ahsan H. Mansur, Executive Director of Policy Research Institute (PRI) of Bangladesh said.
“The government’s policies are not bad and the new budget looks relatively positive. Yet, businesses are not coming up with investments due to a lack of energy and infrastructure,” H. Mansur said while replying to a question from The New Nation.
“The initiative will surely bring a balancing environment among the local businessmen as all of them cannot avail low cost foreign fund. which were making some of the businessmen healthy and the others sick,” Dr. A B Mirza Azizul Islam, former advisor to the caretaker government said.
However, according to the statistics with the central bank, foreign lenders injected around US$ 4.8 billion worth loans in the country’s private sector in the last few years.
The inflow was found gradually creating uneven competition among the local business firms as most of the local firms cannot make themselves fit for the low cost fund (interest rate of foreign loans are up to 5.25 per cent).
Meanwhile, according to the Md. Abdus Salam of Janata Bank, the bank has achieved a grand success in all the indicators in the last calendar year (2015) including operating profit, net profit, case settlement, automation, export and import financing, loans and advances.
Besides, the bank has also shown its success in bringing down classified loans, lowering the number of loss making branches, capital advances and in SME financing.
The bank has made an operating profit of Tk11.65 billion in 2015 against target of Tk11.3 billion along with achieving 100 percent success in export and import financing, showing more than hundred percent success in bringing down classified loans and lowering the number of loss branches to 34 from the existing 60, Salam said.
“We have succeeded to do all these only due to our team work and strong follow-up in all the sectors from head office to rural branches,” he said.
“If everything goes accordingly, we believe the bank would become the number one bank among other state-owned banks soon,” the CEO and Managing Director said.
Among others, Deputy Managing Directors Hasan Iqbal and Hosneara Begum, General Manager (HRD) Jainal Abedin Mia, Deputy General Manager (HRD) Md Sajidur Rahman, and Deputy General Manager (PRD) Md Mukul Hossain of Janata Bank Limited were present at the press met.
