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The governor reassures business leaders who complain of losses due to frequent changes in interest rates and fluctuations in the dollar price
Published : 17 May 2024, 01:43 AM
The interest rate on bank credits will not exceed 14 percent and the dollar will also be available at Tk 117 - even if the lending and exchange rates are driven by the market - Bangladesh Bank Governor Abdur Rouf Talukder has told businesses.
The top central banker provided this assurance after hearing their concerns at a meeting with a delegation of business leaders on Thursday, FBCCI President Mahbubul Alam told journalists.
Frequent changes in interest rates and fluctuations in the dollar's price are disrupting business policy-making, and many industries are facing substantial losses, Governor Talukder was told.
He also heard that due to high interest rates and a dollar crisis, some industrial establishments are on the verge of shutting down and defaulting on loan repayments.
The business leaders demanded that the dollar rate be capped at Tk 117. The governor responded that banks could adjust the dollar price to a maximum of Tk 1 more or less than Tk 117.
It was discussed during the meeting at the central bank that the interest rate on loans should not exceed 14 percent, the business leader told reporters.
However, the spokesperson for Bangladesh Bank did not formally comment on the meeting attended by four deputy governors.
FBCCI chief Alam raised a range of issues on behalf of the business community during the meeting, and a copy of his written statement was provided to journalists.
He highlighted in his statement that due to the dollar rate increase from Tk 85 to Tk 110-117, businesses and entrepreneurs are suffering significant financial losses. They are facing challenges in the intensely competitive global market.
He said, "The cost of raw materials, ingredients, and machinery has increased significantly, along with transportation costs, which has greatly pushed production costs and thus, the cost of business operations.
"Additionally, a low demand for products in the international market is also posing challenges to our industrial and export sectors."
The business leader added that due to the long-term effects of Covid-19 pandemic, the Russia-Ukraine war, and the resulting global economic downturn, local industries are severely damaged by internal inflation and increased costs in gas, electricity, and transportation.
"When the accounts related to the sale of products manufactured from imported raw materials financed by buyer's credit are already settled, there is no opportunity for producers to adjust to the additional exchange costs of the dollar. Consequently, this extra exchange price entirely results in losses for the manufacturers."
Former FBCCI president Jasim Uddin said the banking sector is in trouble. Discussions with the governor involved the interest rate, exchange rate, and the losses due to the exchange rate.
"We have said that the interest rate should rise no more. If the interest rates increase, so will default loans. Even if the loan limit for individual recipients does not increase, default loans will increase because these issues are interconnected."
He claimed that big industrial owners have suffered substantial losses due to the exchange rate and said, "We have suggested that there should be a roadmap to recover from this. They are considering giving the option to repay the losses due to the exchange rate in a long-term instalment plan."
"And that the interest rate should not exceed 14 percent, which will be monitored by the central bank," he added.
BGMEA President SM Mannan Kochi said many entrepreneurs outside the economic zones have invested tens of millions and so a request has been made to suspend the Bangladesh Bank's order that no industrial factories can be established outside the economic zones.
The meeting was attended by the Senior Vice President of FBCCI, Amin Helali, Vice President Md Munir Hosain, President of DCCI Ashraf Ahmed, MCCI President Kamran Rahman, BTMEA President Mohammad Ali Khokon, Executive President of BKMEA Mohammad Hatem, City Group Chairman Md Hasan, and CEO of PRAN-RFL Group Ahsan Khan Chowdhury.
