Business leaders call for interest rate ceiling

The Bangladesh Bank told businesspeople that the lending rates will not exceed 14 percent, according to the leaders of several trade bodies.

The assurance comes a week after the banking regulator introduced a market-driven interest rate regime prescribed by the International Monetary Fund (IMF) as part of its conditions for a $4.7 billion loan.

Under the market-driven interest rate regime, banks can fix interest rates based on demand and supply.
"The central bank let us know that interest rates will be decided by market conditions," said Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).
However, the BB assured that the lending rate would not cross 14 percentand it may be even 1 percent less for good borrowers, he added.

Alam made the comments while speaking to reporters after a meeting with Governor Abdur Rouf Talukder at the central bank in Dhaka today.

The FBCCI chief informed that the governor also assured that the business leaders would be able to buy US dollars at Tk 117 per greenback for opening letters of credit.

However, industry people say the governor can give no such assurance under the market-based interest rate regime as some banks have allegedly already hiked their lending rates to more than 14 percent.

Mezbaul Haque, executive director and spokesperson of the BB, told The Daily Star that the governor said there is no justification for the interest rate to go above 14 percent.

"This is because central bank assessments show that the cost of funds is around 6 percent to 7 percent."

Also, Haque believes the exchange rate will not exceed Tk 117 per US dollar as the country will now follow the real effective exchange rate.

"We told the businesspeople to submit a complaint to the central bank if any bank is doing malpractice regarding the fixing of interest rates and exchange rates."

FBCCI President Alam said businesses are suffering financially due to the huge hike in the exchange rate.

The dollar traded at Tk 85 two years ago. Now, the US currency costs as high as Tk 122.

Alam said considering the current global economic situation, they have urged the governor not to raise the interest rate and thereby help maintain the competitiveness of Bangladeshi products.

"If interest rates are increased, the cost of doing business will go up and local industries will suffer. So, a maximum ceiling for the interest rate should be fixed."

SM Mannan, president of the Bangladesh Garment Manufacturers and Exporters Association, said he believed the central bank would support the business sector like it did throughout the coronavirus pandemic.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said they also demanded that the existing single borrower exposure limit be raised from 15 percent to 30 percent.

They also recommended the US dollar exchange rate be left to the market, he added.

The FBCCI chief also said the cost of industrial raw materials and components has increased drastically and fuel and transportation costs have gone up.

"Consequently, the cost of production has climbed and the cost of running businesses has surged."

Against this backdrop, businesspeople requested keeping the supply of US dollars in the market as normal as possible for the sake of keeping import activities uninterrupted.

If the exchange rate is left to the market, the supply of US dollars must be normal, they said.

Leaders of the Metropolitan Chamber of Commerce and Industry, the Dhaka Chamber of Commerce and Industry, the Bangladesh Textile Mills Association and other trade bodies were also present at the meeting.