The New Nation - Internet Edition

THE spread between lending and deposit interest rates of the private commercial banks (PCBs) is high in Bangladesh. The existing gap is more than 6 per cent, which is reportedly higher than that in neighbouring countries. The high lending rates retard investment and industrial development of the country. The spread needs to be narrowed for the sake of the national economy. The business community has demanded bringing down the difference through reduction of interest rates on loans for the productive sectors.

The central bank has long been pressing the PCBs to reduce the same. Responding to the directive of the central bank, the private commercial banks announced in early March cut in lending rates by one percent. The time limit for the promised cut will expire by the end of the current month. While a few banks have already acted on the promise, some others are expected to follow them. But most of the PCBs are yet to take act on to this end. Against this backdrop of slow progress, Bangladesh Bank on Tuesday warned the private commercial banks of stern action if they fail to action their commitment.

Banks are financial institutions not meant for making profit only. They should play very important roles in the development of the economy. By disbursing loans at reasonable interest rates, banks can help create favourable conditions for investment and industrial development. High lending interest rates retard growth of commerce and industry. If the growth of the economy does not flourish the banks would also not flourish in the long run.