Deposit govt funds with PCBs at rates below 6.0pc: ABB

Top executives of the private commercial banks (PCBs) have urged the Bangladesh Bank (BB) to ensure depositing the government's fund with their banks at rates below 6.0 per cent for implementing the single-digit lending rate.

The leaders of Association of Bankers, Bangladesh (ABB) have also requested the central bank to intervene in the public sector banks for depositing their funds with the PCBs at maximum 6.0 per cent interest rate.

ABB made the appeals at a meeting held at BB headquarters in the capital on Monday with BB Governor Fazle Kabir in the chair.

"The ABB leaders are committed to implement the proposed cut in the banks' lending and deposit rates within the stipulated timeframe," a senior central banker told the FE after the meeting.

On June 20, Bangladesh Association of Banks (BAB) decided to bring down the interest rates on both lending and deposit at 9.0 per cent and 6.0 per cent respectively from July 01.

A six-member ABB delegation, led by its chairman Syed Mahbubur Rahman, attended the meeting.

"The BB governor may talk with the finance minister regarding depositing the government's fund at interest rates below 6.0 per cent," the central banker said.

The government allowed the state entities to deposit 50 per cent of their funds with the PCBs instead of the previous 25 per cent to meet their growing demand for liquidity.

"We've sought supports from BB for getting funds of both the government and the public banks to minimise the immediate negative impact of reducing the interest rates," the ABB chairman explained.

He also said the PCBs will implement the proposed cut in their lending and deposit rates in line with the BAB's decisions.

The state-owned enterprises (SoEs) provide deposits to the banks, particularly to the PCBs, at interest rates ranging between 9.00 per cent and 10.50 per cent, according to the banking sector insiders.

On the other hand, the state-owned commercial banks (SoCBs) are now providing term deposits to other banks, particularly to the PCBs, at rates between 8.50 per cent and 9.50 per cent.

The PCBs are forced to offer higher interest rates on deposit to comply with the advance-deposit ratio (ADR) rules and the commitments made to their clients, they added.

Meanwhile, BAB has requested its member banks to take necessary steps for keeping the deposit and lending rates within 6.0 per cent and 9.0 per cent respectively from July 01.

To this effect, the association has issued letters to the chairmen of all its affiliated banks.

The BAB's request came following the decisions taken at a meeting of the association on June 20.

It was decided at the meeting that the deposit and lending rates would be kept within 6.0 per cent and 9.0 per cent respectively in line with the instruction of Prime Minister Shiekh Hasina.

"After thorough discussions, BAB at the meeting on June 20 decided to keep lending and deposit rates within 6.0 per cent and 9.0 per cent respectively to help boost the country's investment and create more jobs," according to the letter.

"So you are requested to take necessary steps in this connection," it added.

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