Private banks cap lending rates at 9%, deposit interest rates at 6%

Owners of private banks have announced to cap interest rates on loans at 9 percent after the prime minister urged them to bring the rates down to single digits as her government aims to boost domestic investment.

Chief Economics Correspondentbdnews24.com
Published : 20 June 2018, 06:05 PM
Updated : 20 June 2018, 06:05 PM

The Bangladesh Association of Banks or BAB said they took the decision on the rates in a meeting in Dhaka on Wednesday.

“We’ve had a long meeting and fixed the rates of lending and deposit interest rates,” BAB Chairman Nazrul Islam Majumder said at a news conference.

According to him, the maximum rate of interest for bank deposit will be 6 percent.

The decisions would be effective from July 1, he said and added that the banks violating the ceilings would be punished.

Majumder, the chairman of Exim Bank, said the decisions aimed to prop up Bangladesh’s economy and development following Sheikh Hasina’s instructions.

He also said Islami Bank, Social Islami Bank, Union bank, First Security Islami Bank and Al-Arafah Islami Bank have already said they were lowering the lending rate to single digits from next month.

“They why can’t the others do it?” he asked.

NRB Global Bank Chairman Nizam Chowdhury, former chairman and incumbent Director of South-East Bank Azim Uddin Ahmed, and NRB Commercial Bank Chairman Tamal SM Parvez were present at the media call.

Hasina told the private bank owners to cut the interest rate on bank loans in a meeting in April.

The Bangladesh Bank also asked the banks in May to bring down the ‘spread’ – the difference between interests on loans and deposits – to 4 percentage points by decreasing the lending rates.

According to latest central bank data, the private commercial banks are charging 12 to 15 percent interests on loans while collecting deposits at interest rates between 8 and 11 percent.