Finance Minister AHM Mustafa Kamal says the government is firm about enforcing single digit interest rates on both bank loans and deposits from April
The government is determined to enforce single digit interest rates on bank loans from April, Finance Minister AHM Mustafa Kamal has said.
"We will get tough about implementing the prescheduled nine percent interest on bank loans and six percent interest on deposits," he told journalists after meetings of the cabinet committees on government purchase and economic affairs at the Secretariat on Wednesday.
Journalists quizzed the minister about the deferral of interest rate implementation from January to April.
"We had planned to implement the rates gradually on loans and deposits. But we later observed that many sectors would be dropped if we implemented the nine percent lending rate for the manufacturing sector only," said Kamal.
Referring to a conversation with the prime minister, Kamal said, "The PM said is in favour of facilitating all borrowers if we really want to get a good output. The country will be benefitted whatever the borrowers do — trade, build a new industry or set up a new parlor.
"The bottom line is that the premier wants enforcement in all sectors at the same time," stated the finance minister.
AHM Mustafa Kamal said following his meeting with the prime minister, he sat with the bankers. "They [the bankers] wanted three months more, saying they have some short-term deposits to get matured in the meantime."Kamal said, "But they completely agreed with the implementation of single digit interest rates. That is why we have granted them the extension till April."
A circular will be issued in this regard, said the minister, adding, "The bankers will enforce it even without the circular. They are also a part of the government. They will do it."
Regarding the interest rate on deposits, Kamal said, "No bank will be allowed to offer more than the highest six percent. We are getting tough as we cannot tolerate higher interest rates on deposits anymore."
"I am also aware of the abrupt decision taken almost overnight. But we did not have alternatives. If we had not gone for such a move, industries would not flourish and the volume of default loans would not come down," Kamal went on saying.
The finance minister said that state-owned and private commercial banks will share government deposits on a 50-50 basis. Private banks will get government deposits on the basis of their paid-up capital.
However, the interest rate on deposits at state-owned banks will be 5.5 percent, while the rate will be 6 in private banks.
"If the rate remains the same, people will opt for state-owned ones," explained the minister.
"If the bankers get deposits with six percent interest, why should they not be able to lend with a nine percent interest rate?" questioned Kamal. He said, "As they did not implement it earlier, this time the government is determined."
The business community has long called for interest rates on lending and deposits to be fixed at nine percent and six percent respectively.
Prime Minister Sheikh Hasina, too, has called on banks to slash lending rates on many occasions to little avail.
Revenue collection plan by selling desirable number plates for vehicles
The government is considering revenue collection from auctions for desirable vehicle number plates.
The cabinet committee meeting on government purchases has dismissed a proposal of the Road Transport and Highways Division, Kamal informed journalists. The proposal was about collecting motor driving license smartcards.
"Tenders will be refloated towards coming by suitable suppliers," said the finance minister.
He said, "Foreign countries earn a lot from auctions for vehicle number plates. The auction price fluctuates in relation to how attractive the number plate is. We also want to introduce it."
AHM Mustafa Kamal, however, did not set any dateline for it. "I have been thinking about it for more than six years. I hope it will not take much longer."
Need to look into the stock market
The stock market is divergent from the economy and it needs looking into as to why that is happening, the finance minister said in answer to a question about the stock market.
"We need to investigate if anyone is manipulating things, if any issuer is hiding profits or if there is a lack of good governance which is allowing any criminal to escape," he said.
The minister also criticized the culture of pinning the blame on regulators after a stock market fall.
He expressed his confidence about the future of the stock market, saying "the market must reflect the strengthening of the economy, today or tomorrow."
He expressed his readiness to come up with more instructions to regulators about the stock market if it is really needed.