Interest rates go down from Jul 1

Top bankers yesterday decided to bring down the interest rates on both the loans and deposits to single-digit from July 1.

The Association of Bankers, Bangladesh (ABB), a platform of the chief executive officers of the private banks, took the decision at a meeting at the Mutual Trust Bank Tower in the capital.

Syed Mahbubur Rahman, chairman of the association, told The Daily Star that banks would lower the lending and deposit rates to 9 percent and 6 percent respectively in line with the instruction from the Bangladesh Association of Banks (BAB), a forum of the directors of the private banks.

On June 20, the BAB sent a letter to its member banks asking them to reduce the interest rates on loans and deposits. The state-run banks also took a similar decision the following day.

The development came several weeks after the government showered the private banks with a raft of privileges, drawing criticism from different quarters.

Rahman, however, said that the ABB is an advocacy group of managing directors and can't impose any decision on banks.

"The boards and management of respective banks will take the decision on how to bring down the interest rate. But, we will have to do it in line with the BAB decision," he said.

The ABB has sought support from the central bank to implement the new rate, he said.

"We have requested the central bank so that funds of the state-owned enterprises and commercial banks are kept at 6 percent interest rate at the private banks. It will help the private banks bring down the lending rate," Rahman said.

If the funds are not kept at the preferred rate, the private banks will face difficulties in maintaining the single-digit lending rate, said another leader of the ABB requesting anonymity.

"The BB governor may talk to the finance minister on depositing government funds at interest rates below 6 percent," he said.

The government has recently allowed the state enterprises to park 50 percent of their funds with the private commercial banks, up from 25 percent previously to help the lenders ride out the liquidity crunch.

The state-owned enterprises keep deposits at banks at interest rates ranging between 9 percent and 10.50 percent, while the state-owned commercial banks provide term deposits at 8.50 percent to 9.50 percent.