Private commercial banks (PCBs) will further slash the deposit rate by 1 percentage point to 8.5 percent this month, aiming to reduce the "cost of funds" for the banks.
Top bankers have taken the decision at a meeting of the Association of Bankers Bangladesh (ABB), a platform of managing directors of PCBs.
The bankers argue that it is not possible to reduce the lending rate without trimming the deposit rate. The latest move came despite a reduction in corporate tax by 2.5 percentage points to 42.5 percent in July.
“We have decided to limit the highest deposit rate at 8.5 percent to reduce the cost of funds,” said Shahjahan Bhuiyan, managing director of United Commercial Bank and vice chairman of ABB.
The new deposit rate is likely to take effect from August 16.
An economist said savers could now switch to other investment tools that give higher returns.
“Small savers have few options other than what banks have to offer," said Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies and former chief economist of the central bank.
He said some savers might flock to saving certificates that give a 12.5 percent interest rate -- 4 percentage points higher than what the bank is going to offer.
In April 2009, PCBs set the deposit rate ceiling at 9.5 percent from the previous 13 percent, following Bangladesh Bank's order to limit the lending rate at 13 percent from an average of 14.5 percent.
The central bank also wants the spread - the gap between lending and deposit rates - to fall within 5 percent.
The government later cut the corporate tax rate in July 2009, to cushion the banking sector against falling investments due to the global financial crisis.
But banks are yet to pass the benefits of corporate tax cuts on to the customers, blaming the high prices of funds.
Bhuiyan said his bank's cost of funds is 10.5 percent at the moment and the impact of the previous deposit rate cut is yet to be materialised for about 80 percent of the bank's deposits.
However, the cost varies from bank to bank.
Pubali Bank's COF was slightly below 9 percent on June 30.
“A cut in the deposit rate is necessary to reduce the lending rate and the cost of fund,” said Helal Ahmed Chowdhury, managing director of Pubali Bank, the country's oldest and largest private bank.
He said classified loans are also pushing the bank's lending rate up.
Chowdhury however said they lend to prime customers at rates that are even below the rate set by the central bank of 13 percent in April.
BB Governor Dr Atiur Rahman said on Sunday the cut in corporate taxes should have an impact on bank lending rates.
“The corporate tax cut should be reflected in the lending rate,” Rahman told a business conference of the state-owned Janata Bank. He said the rate should come down to a single digit.
Source: The Daily Star, August 11, 2009
August 11, 2009
August 04, 2009
Bangladesh Bank sets green loan target
All commercial banks will provide loans up to Tk 1 crore for setting up effluent treatment plant (ETP), solar panel and bio-gas plant at a 9 percent interest rate.
The banks will disburse the loans under a Tk 200 crore refinance scheme of the central bank, which announced yesterday the special loan scheme and sent letters to all banks in this regard.
"The loan scheme is already activated. Any bank can finance under the scheme from today," said Md Nazrul Huda, deputy governor of Bangladesh Bank, yesterday.
The central bank will monitor the scheme to ensure proper disbursement, Huda said.
Setting up ETP at industrial units has been discussed at different levels over the last few years. But industry owners were refusing to set up such plants with their own fund, demanding a special financing system from the government.
"The Bangladesh Bank move will help the industrial units become environmentally compliant," said Abdul Hai Sarkar, president of Bangladesh Textile Mills Association.
In line with environment protection rules, setting up ETP is mandatory for all industrial units that produce liquid wastes.
Under the refinancing scheme, these industrial units will get preference, and the industry owners will be entitled to a maximum Tk 1 crore loan for setting up ETP.
However setting up of ETP should be ensured within six months after taking loans.
Any customers from urban areas can get Tk 60,000 to Tk 175,000 as loans to install solar power system of 170 watt to maximum 520 watt. The interest rate is 9 percent, which will be 10 percent if the loans are disbursed by any non-government organisation.
The loans will have to be repaid within three years.
In rural areas, if anyone wants to set up 520-watt solar system for commercial purpose, the maximum limit of the loan will be Tk 175,000. But for personal use, customers will get Tk 10,000-Tk 70,000 for 10-130 watt.
The loan range will be from Tk 18,000 to Tk 36,000 for setting up poultry or dairy firm-based bio-gas plants for both individual and commercial use.
Source: The Daily Star, August 4, 2009
The banks will disburse the loans under a Tk 200 crore refinance scheme of the central bank, which announced yesterday the special loan scheme and sent letters to all banks in this regard.
"The loan scheme is already activated. Any bank can finance under the scheme from today," said Md Nazrul Huda, deputy governor of Bangladesh Bank, yesterday.
The central bank will monitor the scheme to ensure proper disbursement, Huda said.
Setting up ETP at industrial units has been discussed at different levels over the last few years. But industry owners were refusing to set up such plants with their own fund, demanding a special financing system from the government.
"The Bangladesh Bank move will help the industrial units become environmentally compliant," said Abdul Hai Sarkar, president of Bangladesh Textile Mills Association.
In line with environment protection rules, setting up ETP is mandatory for all industrial units that produce liquid wastes.
Under the refinancing scheme, these industrial units will get preference, and the industry owners will be entitled to a maximum Tk 1 crore loan for setting up ETP.
However setting up of ETP should be ensured within six months after taking loans.
Any customers from urban areas can get Tk 60,000 to Tk 175,000 as loans to install solar power system of 170 watt to maximum 520 watt. The interest rate is 9 percent, which will be 10 percent if the loans are disbursed by any non-government organisation.
The loans will have to be repaid within three years.
In rural areas, if anyone wants to set up 520-watt solar system for commercial purpose, the maximum limit of the loan will be Tk 175,000. But for personal use, customers will get Tk 10,000-Tk 70,000 for 10-130 watt.
The loan range will be from Tk 18,000 to Tk 36,000 for setting up poultry or dairy firm-based bio-gas plants for both individual and commercial use.
Source: The Daily Star, August 4, 2009
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