The Financial Express

Bankers balk at minimum deposit interest rate

| Updated: August 12, 2021 08:52:28

Bankers balk at minimum deposit interest rate

A portion of fixed deposits rather than the entire amount in Bangladesh's banking sector is set to come under 'floor', or minimum interest rating, imposed by the central bank recently to protect depositors' interests.

Bankers apparently balk at the government move and sit today to plan what can be done.

The financial term floor is the lowest price or rate that can be offered against a financial product.

The fixed deposits contributed more than 45 per cent of the total deposits in the banking industry, according to officials.

Of the amount, individual depositors' along with recognised funds hold nearly 30 per cent of total fixed deposits in all the scheduled banks, they added.

Meanwhile, the overall deposits grew by more than 14 per cent to Tk 13504.13 billion as on June 30, 2021 from Tk 11809.97 billion a year before despite the ongoing Covid-19 pandemic pains, according to the central bank's latest statistics

Such interest rate on fixed deposits is an issue likely to dominate the bankers' meeting scheduled to be held virtually this (Wednesday) afternoon.

The central bank may respond to the issue by mentioning the latest situation on fixed or term deposits in the country's banking system if any managing director (MD) and chief executive officer (CEO) of any bank raises the issue at the meeting.

"We'll ask the bankers for taking preparations to implement the notification on rationalisation of interest rate on term deposits properly," a senior official of Bangladesh Bank (BB) told the FE Tuesday.

All the scheduled banks have been instructed to fix interest rates on term deposits with maturity of three months and above at rates not less than the rate of inflation, which was published three months before, according to a notification issued by the BB Sunday.

Only individuals and two recognized funds-provident and gratuity -holders are eligible to receive such interest rate on their deposits, according to the central banker.

"It's a people-oriented policy," the central banker noted.

He also said the central bank has already provided some policy supports to the banks for improving their financial health through offsetting the adverse impact of the Covid-19 pandemic on their businesses.

All MDs and CEOs of the banks have already been invited to attend the online meeting, they added.

"Definitely, we'll talk about the issue at tomorrow's meeting," an MD and CEO of a leading bank told the FE while replying to a query.

He also said he would try to explain the possible impact of the newly set interest rate on fixed deposits on the country's banking sector in the near future.

At the meeting, BB Governor Fazle Kabir is expected to ask the bankers to execute the second phase of two major stimulus packages-large industries and service sectors and the cottage, micro, small and medium enterprises (CMSMEs)--worth Tk 600 billion properly to help revamp the coronavirus-hit economy.

Besides, utilization of funds for startup is likely to be discussed at the meeting, another BB official added.

The central bank has already formed a startup-refinancing fund worth Tk 5.0 billion aiming to develop entrepreneurship in the country.

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