BB opposes govt plan to hike savings tool interest ratesNazmul Ahsan
The Bangladesh Bank has opposed a plan of the government to increase interest rates of national savings certificates saying that the proposed measure will hurt the business of banks as their cost of obtaining funds will increase.
Once the yield rates on the national saving certificates are increased, the banks will have to hike the interest rates on deposits resulting in an inevitable negative consequence on the economy, BB said in correspondence with the finance ministry on Wednesday.
‘Bangladesh Bank does not support the proposal of increasing the interest rates of savings tools,’ said the position paper of the central bank after it was asked to give its opinion on the proposal made by a high-powered committee, headed by an additional secretary of the ministry.
The committee recommended a hike in the existing yield rates of all categories of saving tools, ranging from 0.23 percentage point to 1 percentage point, to attract savers and lessen the government’s dependency on bank loans to finance its budget deficit, a high official in the ministry said.
Presently, the rate of return on five-year Sanchayapatra (saving certificate) is 13.19 per cent including 0.99 per cent in Social Security Premium (SSP), three monthly Sanchayapatra (3-year) is 12.59 per cent, the rate for five-year Pensioner Sanchayapatra is 11.45 per cent, the rate of return for Poribar Sanchayapatra is 13.45 per cent and the rate of return for Postal Savings Bank (fixed deposit) is 13.24 per cent.
The BB position paper said that the central bank had been pursuing a monetary policy aimed at boosting bank lending in the private sector at lower interest rates and to attain the goal, it had cut the Repo rate (the interest rate in which BB lends money to banks) and reverse Repo rate (the interest rate at which BB takes loan from the commercial banks,) in February.
‘The BB has long been pressing the commercial banks to reduce their deposit and lending rates through moral persuasion,’ the paper further said.
In the current situation, if the yield rates of saving tools are increased, it is very likely to trigger a hike in the bank deposit rates which would affect the ‘cost of funds’ of banks and eventually shoot up their lending rates, the position paper clarified.
Currently, bank interest rates on term deposits range between 10 and 12.5 per cent, while yields rates of the two–year and five-year Treasury Bonds are between 10 and 12 per cent.
Bangladesh Bank officials said that in the name of protecting the small savers it would be unwise to destabilise the already ailing banking sector as their profitability had experienced a heavy setback in recent years with soaring classified loans shattering banks and other financial institutions.
A finance official said they would carefully examine the opinions of Bangladesh Bank before making any final decision.
The initiative to increase the interest rates for savings tools was taken due to the poor non-bank borrowing by the government as the investment in the tools by clients was only Tk 772 crore in the last fiscal year against the target of Tk 7,400 crore.
The government set the net borrowing target from the savings certificates at Tk 4,971 crore for the current fiscal year.
The five-member committee, headed by Finance Division additional secretary Ranjit Kumar Chakraborty also recommended the withdrawal of existing 5 per cent tax at source, lifting the current limits on investment in the saving tools and accepting those as collaterals against bank loans.
comments powered by Disqus
A 12-member delegation of the North American Alliance for Bangladesh Worker Safety Initiative will arrive in Dhaka today to discuss in details its five-year action plan to ensure safety standards at the Bangladeshi readymade garment factories. Full story
Politicians and businessmen at a seminar on Saturday said two major political parties must have a consensus on economic issues in their election manifestoes for the sake of business and industrialisation and avoid anti-development political programmes like hartal. Full story
The National Board of Revenue has taken a set of actions to eliminate hassles in getting taxpayer’s identification number online or e-TIN, NBR officials said. They said that they had included edit and validate options in the e-TIN registration and re-registration... Full story
Per capita debt burden of the country increased by Tk 407.65 to Tk 3,389.84 in the last fiscal year from that in the previous fiscal year, local think-tank Unnayan Onneshan said. In its August issue of Bangladesh Economic Update released on Saturday... Full story
Bangladesh has urged India to remove para-tariff and non-tariff barriers to improve the trade balance between the two neighbouring countries. Bangladesh commerce secretary Mahbub Ahmed has raised the issue with his Indian counterpart SR Rao... Full story
Shameem Ahsan, president of the Bangladesh Association of Software and Information Services, talks about hindrances to growth of the country’s software industry in an interview with New Age on Saturday. Interviewed by Ahmed Shawki New Age: What is the present situation... Full story
Dhaka stocks ended flat for the second week last week as the investors continued with the wait-and-see policy with a fear that the country’s political situation might turn unstable ahead of the next national election. Full story
The finance minister, Abul Maal Abdul Muhith, on Saturday rejected a proposal for an aviation university as an aviation faculty under any of the universities could be opened. Muhith made the comment addressing a seminar on ‘Sustainable development of the aviation... Full story
Dhaka Chamber of Commerce and Industry and Bangladesh Association of Software and Information Services held a workshop for 200 IT freelancers in the city on Saturday to bring them under the DCCI’s project of creating 2,000 entrepreneurs. Full story
Samsung Electronics Co will invest $500 million to build a packaging and testing facility in northwestern China, the official China Daily reported on Saturday, as South Korea’s biggest company expands operations in China. Full story