BB reaffirms that the bank deposit rate must not be lower than inflation


An archive photo shows the headquarters of the Bank of Bangladesh in Dhaka. The Bangladesh Bank at the bankers meeting on Wednesday reaffirmed its position that interest rates for deposits in banks should not be lower than the rate of inflation amid bankers’ objections. – Photo New Age

The Bangladesh Bank at the bankers meeting on Wednesday reaffirmed its position that interest rates for deposits in banks should not be lower than the rate of inflation amid bankers’ objections.

The central bank set the minimum interest rate on deposits on Sunday, as most banks offered interest below 5% and in some cases as low as 3% to depositors.

BB Governor Fazle Kabir chaired Wednesday’s meeting, which was attended by senior central bank officials and senior bank officials.

At the meeting, bankers expressed fears that the newly imposed deposit floor rate could ultimately hamper bank profitability, BB officials present at the meeting told New Age.

A possible drastic drop in bank profitability would ultimately discourage bank sponsors.

Bankers also mentioned that shareholders have invested their money for a long time and are getting investment returns when paying taxes on the dividend paid.

Considering their investments, the return received by shareholders was not high, they said.

The bankers also mentioned that it would be difficult for the central bank to phase out the controlled interest rate regime in the near future as it would benefit both depositors and borrowers while the owners of the banks would only be the owners. losers.

In addition to the weighted average interest rate spread, the central bank has also been asked to factor in other costs, including non-performing loans and operating costs, which cost banks around an additional 3.5%. in addition to the deposit rate.

The bankers also mentioned that the situation was a bit difficult for them since the lending rate was reduced and the deposit rate was increased.

In response, senior BB officials said banks should protect the interests of depositors since they are the source of 80 percent of banks’ funds.

When bank shareholders received a 30% dividend, depositors faced erosion of funds as they received 2-3% interest, BB officials said.

To protect the interests of bank shareholders, the BB suggested that banks become efficient by reducing NPLs and operational costs, they said.

As part of BB’s mandate, the interest on deposits must be protected and the return on investment must be assured, officials said.

Asked about the central bank’s decision, BB executive director and spokesperson Md Serajul Islam told New Age that the central bank had taken into account many factors before the circular was issued and that it did not It was not necessary to change the decision.

Banks will have to comply with the BB’s instructions in the best interest, he said.


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