FE Report
Two representative associations of private commercial banks (PCBs) have decided to follow a uniform policy on deposit rate, indicating a maximum rate of interest at 12 per cent on deposits.
Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) - the associations representing the owners of PCBs and their Chief Executive Officers (CEOs) or Managing Directors respectively - took the decision Saturday at a joint meeting in Dhaka.
BAB Chairman Md. Nazrul Islam presided over the meeting which was attended by the chairmen, MDs and representatives of 29 PCBs.
Besides the decision taken on the deposit rate, the meeting resolved to keep the limit on lending rate on import funding for food items at 12 per cent.
Saturday's decisions of the BAB and ABB on deposit rate was taken in the backdrop of the pressure on some commercial banks to mobilise deposit at high rates to meet their liquidity problems and to comply with the directives of the Bangladesh Bank about credit-deposit ratio (CDR).
In some cases, the rate on some term deposits was offered by some banks at as high as 14 per cent, substantially up from their publicly announced rate.
The high cost of deposit has also led to hikes in lending rate in many cases.
Addressing the meeting, BAB President Nazrul Islam Majumder noted that recently commercial banks were instructed unofficially not to collect any deposit, at above 12 per cent rate of interest but this could not be adhered to, in many cases.
This time BAB has passed a resolution, urging the PCBs to follow a uniform policy on deposit rate, by not offering to any client more than 12.0 rate of interest on any form of deposit.
Sources informed the FE that the Saturday's joint meeting of BAB and ABB, decided also to withhold cooperation with those banks if they are found to offer deposit rate exceeding 12 per cent. "If any bank does not comply with our decision on deposit rate, other banks will consider stopping all kinds of inter-bank transactions with the concerned PCB," a source said.
At the joint meeting, the BAB chairman reminded all concerned that the PCBs had committed to maintaining a uniform deposit rate policy by not offering rate of interest at above 12 per cent on any form of fund kept with them, at a meeting of the leaders of the association last Thursday with Prime Minister Sheikh Hasina.
ABB President Mahmud Sattar said, "It is very important to have a uniform stance on deposit rate immediately to bring back discipline in the banking sector."
Sources said at least 21 commercial banks, out of a total of 47, increased their interest rates on deposit in the month of May to meet the growing demand for funds to strengthen their liquidity position while 11 commercial banks raised their lending rate.
Insiders said over the last couple of months, some banks have been trying to bring down their CDR to a safe limit through shoring up their deposit base.
The central bank had set June 30 as the deadline for bringing down the CDR of the commercial banks to a reasonable level.
Under the directive, 19 PCBs will have to bring down their CDR to 85 per cent and five Sharia-based Islamic banks, to 90 per cent.
In the meeting, Mr Majumder said, "Banks have applied to the central bank to extend the time-limit for adjustment of their CDR, up to December 31. If the BB fixes the CDR at 90 per cent, it will not put the commercial banks to any disadvantage."
Recently, BAB proposed for increasing CDR by 5.0 percentage points from the existing 85 per cent to 90 per cent for normal commercial banks and 95 per cent for Sharia-based Islami banks.
The BAB president said there is a "huge" liquidity surplus "in paper" in the banking system, but commercial banks cannot invest the same as it has been kept as treasury bonds under some mandatory requirement by the regulatory body.
During the meeting, Chairman of City Bank Limited Aziz Al Kaiser said banks will have to find out a sustainable way of making profit from their operation. "It cannot be expected that private banks will make hefty profits every year," he noted.
The meeting also decided to call on the finance minister to demand a fair share of all kinds of government deposits for the PCBs.
Two representative associations of private commercial banks (PCBs) have decided to follow a uniform policy on deposit rate, indicating a maximum rate of interest at 12 per cent on deposits.
Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) - the associations representing the owners of PCBs and their Chief Executive Officers (CEOs) or Managing Directors respectively - took the decision Saturday at a joint meeting in Dhaka.
BAB Chairman Md. Nazrul Islam presided over the meeting which was attended by the chairmen, MDs and representatives of 29 PCBs.
Besides the decision taken on the deposit rate, the meeting resolved to keep the limit on lending rate on import funding for food items at 12 per cent.
Saturday's decisions of the BAB and ABB on deposit rate was taken in the backdrop of the pressure on some commercial banks to mobilise deposit at high rates to meet their liquidity problems and to comply with the directives of the Bangladesh Bank about credit-deposit ratio (CDR).
In some cases, the rate on some term deposits was offered by some banks at as high as 14 per cent, substantially up from their publicly announced rate.
The high cost of deposit has also led to hikes in lending rate in many cases.
Addressing the meeting, BAB President Nazrul Islam Majumder noted that recently commercial banks were instructed unofficially not to collect any deposit, at above 12 per cent rate of interest but this could not be adhered to, in many cases.
This time BAB has passed a resolution, urging the PCBs to follow a uniform policy on deposit rate, by not offering to any client more than 12.0 rate of interest on any form of deposit.
Sources informed the FE that the Saturday's joint meeting of BAB and ABB, decided also to withhold cooperation with those banks if they are found to offer deposit rate exceeding 12 per cent. "If any bank does not comply with our decision on deposit rate, other banks will consider stopping all kinds of inter-bank transactions with the concerned PCB," a source said.
At the joint meeting, the BAB chairman reminded all concerned that the PCBs had committed to maintaining a uniform deposit rate policy by not offering rate of interest at above 12 per cent on any form of fund kept with them, at a meeting of the leaders of the association last Thursday with Prime Minister Sheikh Hasina.
ABB President Mahmud Sattar said, "It is very important to have a uniform stance on deposit rate immediately to bring back discipline in the banking sector."
Sources said at least 21 commercial banks, out of a total of 47, increased their interest rates on deposit in the month of May to meet the growing demand for funds to strengthen their liquidity position while 11 commercial banks raised their lending rate.
Insiders said over the last couple of months, some banks have been trying to bring down their CDR to a safe limit through shoring up their deposit base.
The central bank had set June 30 as the deadline for bringing down the CDR of the commercial banks to a reasonable level.
Under the directive, 19 PCBs will have to bring down their CDR to 85 per cent and five Sharia-based Islamic banks, to 90 per cent.
In the meeting, Mr Majumder said, "Banks have applied to the central bank to extend the time-limit for adjustment of their CDR, up to December 31. If the BB fixes the CDR at 90 per cent, it will not put the commercial banks to any disadvantage."
Recently, BAB proposed for increasing CDR by 5.0 percentage points from the existing 85 per cent to 90 per cent for normal commercial banks and 95 per cent for Sharia-based Islami banks.
The BAB president said there is a "huge" liquidity surplus "in paper" in the banking system, but commercial banks cannot invest the same as it has been kept as treasury bonds under some mandatory requirement by the regulatory body.
During the meeting, Chairman of City Bank Limited Aziz Al Kaiser said banks will have to find out a sustainable way of making profit from their operation. "It cannot be expected that private banks will make hefty profits every year," he noted.
The meeting also decided to call on the finance minister to demand a fair share of all kinds of government deposits for the PCBs.
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