State-owned banks to slash lending rates

Seven state-owned banks jointly decided to lower their lending rates by 1.5 to 2 percentage points in a bid to compete with private banks and spur investment for the economy.

The new rates will come into effect on February 1.

The decision, which was taken yesterday at a meeting at the Agrani Bank headquarters, comes at a time when the gap between deposit and credit growth rates continues to widen.

The seven banks are: Sonali, Janata, Agrani, Rupali, BASIC, BDBL and Krishi banks.

On November 5, the state banks' credit growth stood at 8.49 percent and the deposit growth 13.34 percent, according to central bank statistics. For instance, the deposit growth of the largest state bank, Sonali, was 15.27 percent while its credit growth was negative.

Pradip Kumar Dutta, managing director of Sonali Bank, said they have taken the decision in principle and will make it effective after getting the approval from their respective boards.

The banks now have huge amount of excess liquidity, so they have decided to cut the rate to spur borrowing, he said, adding that the good borrowers will be given rebates on top of the lower lending rates.
The respective banks will decide on the rate of rebate after taking the board's approval.

At present, the state banks offer interest rates within the range of 10 to 15 percent.

The rate of interest on term loans is 13-14 percent, while for working capital it is 14 to 15 percent, according to the central bank statistics.

In contrast, private banks offer 11 percent for both term and working capital loans.

An official of Agrani Bank said as the rate of interest in private banks is low many borrowers are leaving state banks to take credit from private lenders.

The banks also decided to cut the deposit rate by 0.50 percentage points to make it 7 percent at yesterday's meeting.
Daily Star