The New Nation - Internet Edition

Staff Reporter

Commercial banks Monday pledged to gradually reduce their lending rates by an average of over 1 percentage point from this month while the gap between lending and deposit rates will not exceed 5 per cent.

The Bangladesh Association of Bank, an organisation of owners of commercial banks, yesterday submitted a roadmap in this regard to the Bangladesh Bank after having an intensive exchange of views among the members of the association and chief executive officers of the banks.

Of the bank charges and commissions, the banks have decided to fix the upper limit of commission on LC opening at 0.50 per cent compared to a current range of 0.30-0.70 per cent. The banks would charge the commission below the upper limit as per bank-client relationship.

"They (banks) submitted a comprehensive proposal as the Bangladesh Bank had asked for one that could be implemented," BB Governor Dr Salehuddin Ahmed told newsmen after a meeting with the bank owners and executives at the central bank.

Replying to a question, he said the Bangladesh Bank did not give any decision on the proposal. Instead, the banks themselves would implement the proposal on their part as soon as possible.

Chairman of Bangladesh Association of Banks (BAB) Nazrul Islam Mazumder said the lending rate would come down to an average range of

14.75-15.00 per cent from the present 16 per cent while individual banks would have discretion to set their respective rates within the range.

He added that it would help reduce the spread between deposit and lending rates within 5 per cent, close to the Bangladesh Bank's desire of 4-5 per cent.

"There'll be no change in the deposit rate," said the BAB chairman, adding that they have decided to cut the lending rate only from the sacrificing profit margin in the greater interest of the nation.

"It's unconditional," he replied to another questioner, adding that they have, however, requested the Governor to reduce corporate income tax on banks' earnings, now at 45 per cent.

He added that the Governor assured them of considering it sympathetically and would take up the issue with the National Board of Revenue (NBR).

"It's not possible to implement the proposal overnight. We'll start implementing the proposal by this month and it will be implemented gradually in all the banks," he said.

He estimated that it could take three months to completely implement the proposal.

Earlier, a committee comprising members from bank owners and chief executive officers, has been formed, headed by former BAB chairman

Syed Manzur Elahi, to prepare the proposal through discussions among the commercial banks, particularly considering the interest of the businesspeople, depositors and the shareholders of the banks.

The central bank had asked BAB and Association of Bankers Bangladesh (ABB) at two separate meetings earlier to prepare a guideline in this regard, as a follow-up of major policy decisions on reducing the interest rate spread and bank charges taken at a meeting on January 4.

The government on January 4 had decided to formulate a guideline for reducing the interest rate gap between the deposit and lending rates, and rationalize the charges on various 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.

Former FBCCI president Mir Nasir Hossain told newsmen that the rate of reduction of interest is not enough to help boost industrialisation even than it is a welcome step.

He suggested for increasing the interest rate for deposit, which he felt would enhance national savings.