Abu Sazzad :
The lending rate in the banking sector has been continuously declining in the recent months due to sluggish credit demand in the just concluded year 2015.
The traders are reluctant to expand their business paying interest at the existing rate. According to the business people, the bank loan is still high compared with the neighbouring countries. The banking loan rate should be single digit. Already, the business expenditure has become double within the last few years.
The large corporate houses are now enjoying foreign loan facilities at low interest rate, which is more affordable for them. Finding no other alternatives, the scheduled banks are forced to reduce their lending rate for operating the banking business.
Meanwhile, the country’s commercial banks have begun reducing their lending rates for excess liquidity in the money market and for central bank’s move to rationalize the interest rate.
At present, the banking sector is holding over Tk1,00,000 crore idle money. Some banks have already reduced their rates on loans and advances in the recent months, said a senior official of the central bank.
Bangladesh Bank earlier instructed all banks to reduce their lending rate with a view to creating a business friendly atmosphere in the country. The low rate will help the business people expand their business smoothly, said the official.
The average interest rate on lending in the banking sector was 11.35 per cent in October, followed by 11.48 per cent in September and 6.74 per cent in August. The lending rate was 12.32 percent in January last year, according to the data of Bangladesh Bank.
On the other hand, the average interest rate on deposit of the banks had also decreased. The rate was 6.58 in October, followed by 6.66 percent in September and 11.51 per cent in August. It was 7.26per cent in January last year.
Experts said, majority of the banks had recently cut their interest rates both for deposits and lending as they were now facing dull business.
Central Policy Dialogue (CPD) Executive Director Mustafizur Rahman said, the banking business is in a depressing state due to low deposit rate in their saving instruments. At the same time, the government bonds are offering higher rate for the investors. As a result, the general investors are investing their money in the government bonds, he explained.
“Such kind of government policy would help meet their budget deficit, but it will put an adverse impact on the macro economy in the country”, claimed Mustafizur.
Meanwhile, the central bank has set a ceiling for the private-sector credit growth at 14.30 per cent for the first half of the current fiscal 2015-16 (July-December), as per the latest monetary policy statement (MPS).
Credit expansion to the private sector declined due to lower trade financing by the commercial banks. The private sector credit growth stood at 13.22 per cent in October.
Credit flow in the private sector was Tk 5,94,677.40 crore in October 2015 compared with Tk 5,25,233.30 crore during the corresponding period of the last fiscal.
Actually, the business people suffer in doing business because of inadequate gas and electricity connection. Political unrest and uncertainty are another reason of short of target.
Criticizing the central bank policy in decreasing private sector credit growth target in the current fiscal, the CPD Executive Director opined, the private sector credit should be at least 17 to 18 per cent for achieving the expected level of GDP growth of the country.
Large borrowers were now facing crisis and that was another reason for the lower private sector credit growth. Some of the large borrowers are now overburdened with debt while a significant number of them have already become loan defaulters.
The private sector credit growth would face hurdle in the coming months if the existing gas and electricity problem prevails. Moreover, a good number of businessmen earlier became loan defaulters because of the sluggish business amid the political unrest and eventually it became difficult for them to get more loans from banks.
According to the economists, the private sector credit growth would face hurdle in the coming months if the existing gas and electricity problem prevails.
“Ensuring vibrant political environment is highly important to achieve goal in the private sector credit growth,” said Economist Mamunur Rashid to The New Nation.
The commercial banks had recently cut their interest rates on lending but they failed to attract the businesspeople to provide more loans. The situation indicates that the country’s existing business environment is unfriendly for expanding business, said the economist.
The lending rate in the banking sector has been continuously declining in the recent months due to sluggish credit demand in the just concluded year 2015.
The traders are reluctant to expand their business paying interest at the existing rate. According to the business people, the bank loan is still high compared with the neighbouring countries. The banking loan rate should be single digit. Already, the business expenditure has become double within the last few years.
The large corporate houses are now enjoying foreign loan facilities at low interest rate, which is more affordable for them. Finding no other alternatives, the scheduled banks are forced to reduce their lending rate for operating the banking business.
Meanwhile, the country’s commercial banks have begun reducing their lending rates for excess liquidity in the money market and for central bank’s move to rationalize the interest rate.
At present, the banking sector is holding over Tk1,00,000 crore idle money. Some banks have already reduced their rates on loans and advances in the recent months, said a senior official of the central bank.
Bangladesh Bank earlier instructed all banks to reduce their lending rate with a view to creating a business friendly atmosphere in the country. The low rate will help the business people expand their business smoothly, said the official.
The average interest rate on lending in the banking sector was 11.35 per cent in October, followed by 11.48 per cent in September and 6.74 per cent in August. The lending rate was 12.32 percent in January last year, according to the data of Bangladesh Bank.
On the other hand, the average interest rate on deposit of the banks had also decreased. The rate was 6.58 in October, followed by 6.66 percent in September and 11.51 per cent in August. It was 7.26per cent in January last year.
Experts said, majority of the banks had recently cut their interest rates both for deposits and lending as they were now facing dull business.
Central Policy Dialogue (CPD) Executive Director Mustafizur Rahman said, the banking business is in a depressing state due to low deposit rate in their saving instruments. At the same time, the government bonds are offering higher rate for the investors. As a result, the general investors are investing their money in the government bonds, he explained.
“Such kind of government policy would help meet their budget deficit, but it will put an adverse impact on the macro economy in the country”, claimed Mustafizur.
Meanwhile, the central bank has set a ceiling for the private-sector credit growth at 14.30 per cent for the first half of the current fiscal 2015-16 (July-December), as per the latest monetary policy statement (MPS).
Credit expansion to the private sector declined due to lower trade financing by the commercial banks. The private sector credit growth stood at 13.22 per cent in October.
Credit flow in the private sector was Tk 5,94,677.40 crore in October 2015 compared with Tk 5,25,233.30 crore during the corresponding period of the last fiscal.
Actually, the business people suffer in doing business because of inadequate gas and electricity connection. Political unrest and uncertainty are another reason of short of target.
Criticizing the central bank policy in decreasing private sector credit growth target in the current fiscal, the CPD Executive Director opined, the private sector credit should be at least 17 to 18 per cent for achieving the expected level of GDP growth of the country.
Large borrowers were now facing crisis and that was another reason for the lower private sector credit growth. Some of the large borrowers are now overburdened with debt while a significant number of them have already become loan defaulters.
The private sector credit growth would face hurdle in the coming months if the existing gas and electricity problem prevails. Moreover, a good number of businessmen earlier became loan defaulters because of the sluggish business amid the political unrest and eventually it became difficult for them to get more loans from banks.
According to the economists, the private sector credit growth would face hurdle in the coming months if the existing gas and electricity problem prevails.
“Ensuring vibrant political environment is highly important to achieve goal in the private sector credit growth,” said Economist Mamunur Rashid to The New Nation.
The commercial banks had recently cut their interest rates on lending but they failed to attract the businesspeople to provide more loans. The situation indicates that the country’s existing business environment is unfriendly for expanding business, said the economist.
