Association of Bankers, Bangladesh requested all banks to drop the interest rate on deposits to 6 percent from February 1
Most banks are yet to drop the interest rate on deposits to 6 percent because they could not hold the Asset-Liability Committee (ALCO) meeting.
On Tuesday, Association of Bankers, Bangladesh (ABB) requested all banks to lower the interest rate on deposits from the first day of February.
Soon after the ABB's decision, several banks held ALCO meetings on Wednesday and Thursday, and dropped the interest rate on deposits. However, most banks could not hold this meeting.
Officials from those banks have said that they will hold the meeting within this week, adding that the move is essential for making any decision regarding interest rates.
Speaking to The Business Standard, Mutual Trust Bank Managing Director Syed Mahbubur Rahman said, "The banks were closed on February 1. We have yet to organise an ALCO meeting. We hope to hold this meeting within this week."
Mahbubur, who is also a former chairman of the ABB, added, "The banks were requested to drop their interest rate on deposits from February 1. For this, they must hold the ALCO meeting.
"I am optimistic that banks interested to follow this request will hold ALCO meetings as soon as possible."
Meanwhile, the 4th generation banks are facing some difficulties in bringing down the interest rate on deposits. Most of these banks are unable to bring it down to 6 percent for all kinds of deposits.
Some 4th generation banks dropped the interest rate to 6 percent for deposits with a one-year term or more, but they kept it at 7 to 7.5 percent for three-month term deposits.
Officials of newer banks believe that the ABB request on lowering the interest rate on deposits is easy to follow for first, second and third generation banks, but it is difficult for the fourth generation ones.
The South Bangla Agriculture and Commerce Bank Ltd has dropped its interest rate to 6 percent for deposits with a term of one year or more, but kept it above 6 percent for deposits with terms of three, six and nine months.
Addressing the issue, the bank's Managing Director Golam Faruque said, "There are some issues with 4th generation banks. The customers have a preference. Why should they deposit their money to a 4th generation bank, and not in first, second or state-owned banks?
"The newer banks must give the customers some additional facilities. We must be given the opportunity to observe the market."
Faruque further said, "We will gradually drop the interest rates for all types of deposits. We held a meeting on Wednesday, and decided to lower the interest on long-term deposits. The move has been implemented from February 1."
"Interest rate for short-term deposits will be lowered to 6 percent by April this year."
Meanwhile, the NRB Commercial Bank says interest rates for all categories of deposits with the bank have already been lowered.
The managing director of the bank, Mukhtar Hossain said, "We are trying to bring down the interest rates on deposits right now because we have to lower our lending rate to 9 percent by April this year.
"The lending rate can be brought down to 9 percent only if we can lower the interest rate on deposits to 6 percent."
Managing Director of NRB Bank Md Mehmood Husain said they have reduced the interest rates on all categories of deposits to 6 percent from this February in line with the ABB's decision.
This rate of interest will be applicable on all new deposits coming from Sunday. However, it will be applicable for old deposits when they will be renewed after maturity.
The fourth generation Padma Bank lowered the interest rates on some types of deposits to 7 percent from January this year.
As per the directive of the government, the banks eye to cut down their lending rate to 9 percent and interest rates on deposits to six percent by April this year. To this end many of the banks have already started to cut down the interest rates on deposits.