Cut in lending rates in next 3 months
Saturday, 29 March 2008

Bank borrowers are likely to see a substantial cut in lending rates within the next three months, as the bankers Thursday promised to start reducing the interest rates from the next month, reports UNB.

"They (bankers) will report on a roadmap in reducing the interest rates after this month," Bangladesh Bank Governor Dr Salehuddin Ahmed told reporters after a meeting with the chief executive officers (CEOs) of government-owned, private and foreign commercial banks.

"You''ll see a substantial reduction in lending rates in three months from April next," Association of Bankers Bangladesh (ABB) chairman K Mahmud Sattar said at the meeting held at the Bangladesh Bank.

The central bank has long been motivating the commercial banks to reduce the lending rates to infuse dynamism into the country''s economic activities through providing increased loans to agriculture, SMEs, housing, IT and other real sectors.

"Term loan has picked up since January but lending to real sectors, including housing, has not," said the Governor, adding that he instructed the banks to accelerate lending to agriculture, housing, shipbuilding, biotechnology and IT sectors.

He also advised the bankers to look beyond their heavy concentration on readymade garments and textiles sector, and start talking to the businessmen to expand lending to other sectors.

The Governor asked the bankers to improve client services as a Bangladesh Bank survey found that the bank clients were not getting the services at the standard they deserve to. Meeting sources said the Governor also asked the bankers to make bank directors from among the clients. They said foreign banks were asked to reduce the interest rate spread by reducing lending rates as well as various charges on banking services.

The Governor would soon hold a meeting in this regard with the foreign banks operating here. ABB chairman Mahmud Sattar said the overall client services could not be improved overnight, but the banks were lately considering investment in improving the services amid intense competition.

Replying to a question, he said the money market has no liquidity crisis, but there might be some inefficiency in liquidity management that pushed up the call rate to some extent.

"The deposit rate has also gone up due to the increased call rate." About financing to capital machinery import, the ABB chairman said there had been a positive growth during the last quarter showing signs that more investment is coming in the near future.

"I think, the growth will be much better in the days ahead," he said, adding that the overall economy was on the recovering trend.

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