Interest on bank loans hiked to double digits again

With the growth of bank loans to the private sector, the interest on said loans have also grown. Due to an increase in demand for loans, many banks have started charging 10-12% interest rates, whereas they were charging below 10% only a few months ago. According to officials from private banks and Bangladesh Bank, some banks are reportedly granting more loans than their limits, creating liquidity crisis. Hence, they are trying to raise the interest rate to recover their funds. Bangladesh Garments Manufacturer and Exporters’ Association President Siddikur Rahman told the Bangla Tribune: “The interest rate has been hiked back to double digits. We now have to take out loans at 10-12% interest.” The BGMEA president said the increase in bank interest rates lead to an increase in business expenses. He called upon Bangladesh Bank to regulate the interest rate and bring it down to single digit. According to a Bangladesh Bank report, as of December 2017, over 40 banks have hiked the interest rate on bank loans, and 30 of them are charging 10% or more. The same report said the credit growth was 19.06% in November 2017, a remarkable increase from 15.66% in June 2017. Dhaka Chamber of Commerce and Industry President Abul Kashem Khan said: “The interest rate was 8-9% even two months ago. But it was suddenly increased.” Exporters’ Association of Bangladesh President Abdus Salam Murshedy said: “Even though the interest rate was supposedly declining, long-term loans have had a double digit interest rate for quite some time. Now even short-term loans are being charged at interest rates of 10% or more. This is bad for investment overall.” The EAB president said lowering interest rates was imperative to promote business growth. He also said political stability, a sound infrastructure, and utilities are essential to business growth. He complained that businessmen were not receiving these facilities. In January 2017, the interest rate on bank loans was below 10%. It was the lowest rate of interest in post-Independence Bangladesh. The previous lowest interest rate was 10.34% in December 1978. Since then it was hiked on a regular basis. After businessmen protested vehemently, the banks set the ceiling for interest rates in 2012.  In the first quarter of 2014, it was 12% and trickled down to 11% in 2013. Until October 2016, the interest rate was 10%. And in November 2017, it was 9.94%. This article was first published on banglatribune.com