The New Nation - Internet Edition

UNB, Dhaka

Bangladesh Bank Monday invited commercial banks to submit their proposals within 15 days to reduce bank charges and interest spread between lending and deposit rates.

Governor Dr Salehuddin Ahmed sought the proposals at a meeting at the central bank with Bangladesh Association of Banks (BAB), a platform of commercial bank directors.

"Bangladesh Bank will take decisions on the interest rate spread and other service charges after receiving their proposals," he told reporters after the meeting.

He said the proposals should be prepared through discussions among the commercial banks, particularly considering the interest of the businesspeople, depositors and the shareholders of the banks. "We're not imposing the decisions… we're trying to do it through discussions (with the stakeholders)," Dr Salehuddin said, replying to a question.

A meeting source said the commercial banks have been asked to submit the proposals by February 28. The central bank is also scheduled to hold another meeting with the chief executive officers of commercial banks on Wednesday. Today's meeting was considered as a follow-up of major policy decisions on reducing interest rate spread and bank charges taken at a meeting on January 4.

"It'll be difficult for us to reduce the lending rates unless the interest on savings certificates and treasury bonds are reduced," said BAB president Nazrul Islam Majumder.

"Bangladesh will, in fact, administer determining the spread," he added.

In a major policy move for the banking sector on January 4, the government decided to formulate a guideline for reducing the interest rate spread between the deposit and lending rates, and rationalize the charges on different bank services.

The central bank, business community and banking service recipients have long been pressing for the policy decisions to reduce the cost of doing business.

The decisions were apparently taken to promptly respond to the Chief Adviser's instruction to the Bangladesh Bank in this regard. It was, however, apprised at the meeting that the spread should not be reduced at the cost of deposit rates.

Chief Adviser Dr Fakhruddin Ahmed recently instructed the Bangladesh Bank to reduce the interest rate spread to 4-5 percent from the present 6 percent to infuse dynamism into the slow-moving economic activities.

The spread is the highest in Bangladesh compared to other parts of the world and it varies from one bank to another while the charges vary even from bank to bank and the charges remain high in Bangladesh.