• Monday, Jun 27, 2022
  • Last Update : 04:24 pm

ABB: Keep small enterprises outside 9% lending scheme

  • Published at 10:10 pm February 2nd, 2020
Bankers-story-Syed-Zakir-Hossain
Photo: Syed Zakir Hossain/Dhaka Tribune

The bankers made the call at a meeting with the central bank Governor Fazle Kabir at the Bangladesh Bank head office

Association of Bankers, Bangladesh (ABB) on Sunday demanded keeping the interest rates for small enterprises outside the planned 9% landing rate planned from April 1.

Businesses having capital base as high as Tk15 crore are categorized as small enterprises in manufacturing sector, while enterprises with capital up to Tk2 crore  in the services sector are treated as small enterprises.

The bankers made the call at a meeting with the central bank Governor Fazle Kabir at the Bangladesh Bank head office. 

ABB Chairman and Eastern Bank Managing Director Ali Reza Iftekhar and most of the managing directors of private banks were present in the meeting. 

Talking to Dhaka Tribune, ABB chairman said that bringing interest rates on small loans down to single digit would be difficult, as the cost of lending in the sector was very high.

“The supervision costs for financing the small enterprises is very high compared to other sectors,” said Ali Reza Iftekhar. 

He said most of the banks that lend to small enterprises would find the single digit interest rate difficult to apply, as they lent money mostly to NGOs (non-government organizations). 

Currently, there are two types of small enterprises. One is in industrial sector and the other is in services industry. The total asset for an industry (except land and building) between Tk75 lakh and Tk15 crore is categorized as small industry.

 On the other hand, total asset for services industry (except land and building) between Tk10 lakh and below Tk2 crore is classified as small industry.

Replaying to a question, Ali Reza Iftekhar said “We are gradually bringing down the deposit rate to 6% from today (Sunday) as part of our preparation for implementing the 9% lending rate from April. But banks will not follow the 6% interest rate for deposit pension schemes (DPS).”

Bangladesh Bank Executive Director Abu Farah Md. Naser said that ABB sought to keep interest on small loan higher than 9%. But the BB governor asked them for a written proposal regarding their demand. 

On December 30 last year, Finance Minister AHM Mustafa Kamal announced that the lending rate would be as high as 9% and deposit rate maximum 6% with effect from April 1.

“This is final. The maximum rate for lending will be 9%, and the maximum deposit rate will be 6%,” Kamal told reporters after a meeting with bank directors and chief executive officers at the Bangladesh Association of Banks (BAB) office at Gulshan.

On January 20 this year, the government asked state-owned enterprises (SoEs) to deposit up to 50% of their surplus fund in private banks and non-bank financial institutions (NBFIs). 

State-owned companies will receive a maximum interest rate of 6% on deposits in public sector banks, according to the notice. On the other hand, the companies will receive 5.5% interest rate in state-owned banks.

The government made the decision as it aimed to boost private investment and kept up the pace of economic growth, said the statement.

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