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Interest rate cuts expected on March 3 PDF Print E-mail
Monday, 25 February 2008

Staff Correspondent

Bank owners and executives will sit with the central bank on March 3 to finalise cuts in interest rates on bank loans, officials said Sunday.

Before that, a nine-member committee assigned to work on a common proposal will hold a meeting Tuesday to explore the interests of businessmen, depositors and shareholders to make further steps on the matter.

FBCCI administrator Syed Manzur Elahi, who heads the committee to work on a common proposal, said Tuesday's meeting would see what rate would be convenient to all.

Elahi said: "A reasonable proposal considering everyone's interests would be made at the meeting before submitting it to Bangladesh Bank."

Asked to specify, Elahi said: "Let us sit first. Then we can say to what extent the rates of interest would be lowered." Bank owners, executives and the central bank will sit together on March 3 to finalise the rate cuts, a central bank official said. An early meeting of the Bangladesh Association of Banks (BAB) and the Association of Bankers, Bangladesh (ABB) assigned the Elahi-led committee to make a common, specific proposal on interest rates.

The committee has also been assigned to make recommendations on lowering charges for various bank products and services. BAB is the platform of the bank owners while ABB represents the executives.

The move came after the interim administration through the central bank asked the retail banks to minimise the gap between interests on bank loans and deposits.

In banking jargon, the gap of interest rates on loans and deposits is called spread. On Jan 29, chief adviser Fakhruddin Ahmed in a letter asked the governor of Bangladesh Bank to fix the matter in consultation with the banks.

Finance adviser AB Mirza Azizul Islam and governor Salehuddin Ahmed followed it up earlier this month by holding a meeting with the chairmen of all banks.

The meeting decided to move the issue ahead. ABB chairman and private bank City Bank managing director K Mahmud Sattar said he expected a reasonable solution to the matter. "We have agreed to lower the interest rates considering the overall situation of the country.

We expect an honourable solution," he told by phone. BAB chairman and Exim Bank chairman Nazrul Islam Majumder said they were about to finalise the proposals and hoped to submit them to the central bank on Feb 28.

"We want the central bank to lay out common principles for the state, specialised, private and foreign banks on interest rates and other charges," he said.

Currently, the rate of corporate tax for banks is 45 percent while the rate is 40 percent for other companies, he said. "We think corporate tax for the banks should also be the same as other companies," he said.

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