Dhaka, June 30 (The Daily Star): Commercial banks'
lending rates have gone down to a three-year low due to a poor demand for money
and a decline in their cost of funds, bankers said.
The trend is also evident in the money market, which has
been in a high degree of liquidity.
“Our lending rates fell drastically and are still on a
declining trend,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
Pubali's lending rate went down 1-1.5 percentage points
on average in one year and stands at 13 percent now.
“Businesses are still shy of making investments; their
confidence should be restored,” said Anis A Khan, managing director of Mutual
Trust Bank.
Khan said lending rates for commercial loans of Mutual
Trust Bank fell to 13.5 percent now, from 16.5 percent a year ago.
The weighted average lending rates of private commercial
banks stood at 13.87 percent in April this year, which was 14.42 percent and
14.66 percent in April 2013 and April 2012 respectively, according to
Bangladesh Bank data.
Foreign commercial banks' weighted average lending rates
fell to 13 percent in April this year from 14.31 percent in the same month a
year ago. Similarly, state-owned commercial banks' lending rates also declined
and stood at 11.12 percent in April 2014, down from 11.19 percent a year ago.
Some banks are now offering as low as 8 percent interest
for fixed deposit receipts of different tenures, a decline from 12.5 percent a
year ago.
Overall, the banks' lending rates declined to 13-14
percent now from 15-16 percent a year ago. Premium borrowers are offered 11-13
percent.
The demand for loans has started to decline since the
beginning of 2013, due to a wait-and-see approach of investors centring the
national elections.
However, investor confidence is yet to return even after
six months of the elections. As a result, the banking sector is now sitting on
an excess liquidity of around Tk 110,000 crore.
Bankers said a scarcity of gas and electricity and poor
infrastructure, including roads, are some of the reasons behind the declining
demand for loans.
“The government's policies are not bad and the new budget
looks relatively positive. Yet, businesses are not coming up with investments
due to a lack of energy and infrastructure,” said Khan of Mutual Trust Bank.
Jamuna Bank's average lending rates fell to 13-14 percent
now from 15-16 percent last year.
“Amid the sluggish demand, the banks are competing with
each other for good clients,” said Shafiqul Alam, managing director of Jamuna
Bank.
“Borrowers are cashing in on the situation and
negotiating rates with a number of banks at a time,” he said.
Non-bank financial institutions (NBFIs) are also feeling
the pinch of the sluggish investment demand. On an average, their lending rates
fell 1-2 percentage points between 2013 and 2014, market players said.
“Corporate borrowing has witnessed a drastic fall in recent
months,” said Selim RF Hussain, managing director of IDLC Finance.
He said massive investments are required in
infrastructure, gas and electricity to boost investor confidence.