Depositors up in arms over 6pc Interest

Anxiety gripped Ahmed Kabir the instant he learnt from the morning paper yesterday that the government has decided to fix a uniform interest rate for all types of deposits from April 1. The Cox’s Bazar native got 9-9.5 percent interest against them, enough to live a comfortable life in his senior years. Inflation leapt 45 basis points in November to 6.2 percent, a 25-month high. The new decision, which was taken to facilitate single-digit interest rate for lending with a view to spurring private investment, will not just affect pensioners but also the fixed income group, who usually keep a portion of their income every month in deposit pension schemes [DPS]. Banks too will have to count losses because of the latest decision as they will have to continue their existing fixed deposit receipts [FDRs] and DPSs while giving out loans at 9 percent, said the managing director of a private bank, wishing not to be named. The government has deposited Tk 200,002 crore in the banking sector, but the majority of the sum is with state-run banks, he added. They might head back to savings instruments, which carry 11.04-11.76 percent interest. Because of their high interest-bearing nature, their sales hit a staggering Tk 49,939 crore last fiscal year.

Source: https://www.thedailystar.net/business/deposit-interest-rate-of-bangladeshi-banks-6-percent-1847881

Borrowers jump for joy at 9pc Interest

The double-digit interest rate is often cited by experts and businesses as the main reason for the declining trend of private sector credit growth in the last 21 months. Business leaders, however, welcomed the out-of-the-box move of the government cautiously as sponsors of banks had previously gone back on their word to bring down the interest rate to less than 10 percent by August last year despite bagging a number of facilities for this end. The benefits include a reduction of cash reserve ratio — which is the percentage of total deposits banks must maintain in the form of cash reserve with the central bank — and repo rate — which is the rate at which the central bank lends money to banks. BGMEA, the Bangladesh Knitwear Manufacturers and Exporters Association and the Bangladesh Textile Mills Association, the three trade bodies in the apparel sector, want them from January 1.

Source: https://www.thedailystar.net/business/news/borrowers-jump-joy-9pc-interest-1847875

Banks bracing for big hit on Profits

Banks will have a hard time logging in profits in the coming days because of the latest government decision to fix interest rate for lending at 9 percent and for deposit at 6 percent. Although the government has announced splitting its funds equally between the state-run banks and private ones, the latest decision may create a haphazard situation for them nevertheless, said experts and a good number of managing directors of banks. The central bank will have to beef up its monitoring on the banking sector with a view to strengthening the financial health of lenders. And the government must give full autonomy to the central bank to do so. If the banks try to implement the single-digit interest rate without improving their health, profitability will decline alarmingly. The central bank earlier took the decision to not intervene in banks’ decision when they set the interest rate. But now it is dictating the rate, which will not be good for banks.

Source: https://www.thedailystar.net/business/news/banks-bracing-big-hit-profits-1847848