High interest of banks has created stagnancy in the business sector as new ventures or expansion projects are failing to ensure return with such rates, said businessmen in a seminar in Dhaka on Monday. The government should come up with a solution to heal the crisis as the banks are holding excess funds but could not lend those as businesses are not interested to take loan at such high rates, they said in the seminar on bank interest rate organised by the Federation of Bangladesh Chambers of Commerce and Industry at the Bangabandhu International Conference Centre.
‘Currently the interest rate ranges from 16 per cent to 19 per cent where additional service charges are taken without proper justification. Sometimes additional service charges are also taken if we want to pay the loan before closing time,’ FBCCI president Kazi Akram Uddin Ahmed, also the chairman of Standard Bank, said in his introductory remark.
He said the local businessmen were failing in the international competition as the competitors and neighbouring countries have much lower interest rate.
‘So, businessmen from other country can supply products at cheap rate as they have cheaper funding,’ he said.
Former FBBCI president AK Azad, also the chairman of Shahjalal Islami Bank, said the core business sector was facing serious problem which was very evident.
‘Import of capital machinery and raw material is decreasing alarmingly which indicates that industrialisation is not there. The core reason for that is high interest rate. It is impossible for any businessman to ensure profitability with such interest rate where we have other serious infrastructure problems,’ he said.
‘As much as Tk 70 thousand crore remains idle in banks now but none is willing to use it because of high rates,’ he added.
Bangladesh Garment Manufacturers and Exporters Association president Md Atiqul Islam said the garment industry was facing serious problem because of such high interest rate.
‘The central bank directed the commercial banks to provide export credit at 7 per cent rate but we don’t get it. We have to pay 13 per cent or higher for export credit,’ he said.
Atiqul suggested that the banks should reduce the luxury in their office decoration and other matters to cut the cost.
‘Banks don’t need such lavish offices,’ he said.
Bangladesh Bankers’ Association president Nazrul Islam Mazumder said bankers were also worried over the situation.
‘The rate is too high. It needs to come down, otherwise none can survive,’ he said.
He said banks were also suffering with excess money as they had liability towards depositors and shareholders.
Finance minister Abul Maal Abdul Muhith, while addressing as chief guest, said the government had already tried the best possible option to bring down the interest rate.
‘Inflation is one key factor that pushes up the interest rate and we have brought down the inflation rate to tolerable limit,’ he said.
He also said the bankers
and business people should sit together and prepare a proposal in this regard for government’s consideration.
Bangladesh Bank governor Atiur Rahman said the rise of defaulted loan was the key reason for high interest rate.
‘As banks try to make up such losses, they charge higher. To get over this situation the banks need to comply with the rules and regulation more strictly,’ he said.
He also said that banks should not set up lavish offices in order to cut down the cost.
‘Rather small two-member unit branches in remote locations could be set up which will be more affective,’ Atiur said.
Secretary of bank and financial institute division of the finance ministry M Aslam Alam said that
banks should focus on low-cost deposit to average the rate.
‘As many as 80 per cent population, mostly rural people, are out of banking service. If the banks can focus there they can average the cost,’ he said.
Policy Research Institute executive director Ahsan H Mansur presented the keynote paper.
‘The problem of interest rate is related with many issues but cartel-like attitude of the bankers is a major problem,’ he said.
FBCCI vice-presidents Monowara Hakim Ali and Md Helal Uddin were also present, among others.
-With New Age input
