Industrial, corporate lending rate cap to stay: Central bank

The 9% lending rate cap on corporate and industrial loans will not be lifted, the central bank said on Monday at a meeting with the country's leading business owners.

Traders sought dollar support from the reserve for their import payment at the meeting, but the Bangladesh Bank high-ups did not provide any assurance on the request. But, the central bank said it will provide assistance from the central bank reserve for urgent needs including government LC payments.

The top business leaders also appealed to the central bank to extend the repayment period of loans, including the loans from the Export Development Fund (EDF), to avoid default. Bangladesh Bank officials said they will consider the demands.

Central bank spokesperson and Executive Director Mejbaul Haque claimed that the Bangladesh Bank did not cap the interest rate on consumer loans. He said the lending rate cap is there for industrial loans, working capital loans, raw material loans.

Governor Abdur Rouf Talukder, Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) President Md Jashim Uddin, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem along with top leaders of central banks and business organisations attended the meeting.

At the end of the meeting, Md Jashim Uddin told reporters, "If the interest rate is low, investment is high. Although raising interest rates in America reduces inflation, I think this does not apply to our country. The governor has said the cap will not be lifted."

He added that they asked the central bank to stabilise the LCs with dollars from the reserves in addition to prioritising imports.

"The Bangladesh Bank has said that it will look into the matter," he added.

Exports were suffering as the production was disrupted due to shortage of gas and electricity.

"We will have to pay the instalments [of loans] to the banks, but it has already become difficult for us to pay the December salaries of the workers. So, we have requested the central bank to extend our loan repayment period till 30 June," said the FBCCI president.

Asked why the bank should give them extension again, he said, "Due to the increase in the raw materials and fuel prices, our situation is now worse than it was during Covid. The government is not able to import fuel due to the price hike and we are not able to run factories due to gas shortage. Now, if I cannot run the factory and open LCs to bring raw materials, how can I pay the loan instalments?"

Jashim Uddin stressed that they need policy support including loan repayment extension like the Covid-time.

"We are paying the interest. So, the bank gets the interest and the borrower is not ending up in default. We think that extending the deadline will not cause any problem to the bank or the borrowers who are struggling at the moment," he said, adding, "I think the governor is positive about this."

The pricing of dollars was also discussed, about which the FBCCI president said now the exporters are getting the price of the dollar at Tk101 and the importers are spending Tk105-106 to buy the dollar.

"We have said the price of dollars should be the same for import and export," he said.

Bangladesh Bank Spokesperson Mejbaul Haque said the global context and the current economic situation of the country were discussed in the meeting.

"The FBCCI has sought policy support similar to the one during the Covid-19 period. We will consider their demands," he said.

"The Bangladesh Bank is considering providing assistance in the import of industrial raw materials. We have continued the import of all products except some specific products," said the central bank official.

Regarding unification of import-export dollar rates, he said, the Bangladesh Bank will gradually implement it.

"Import-export rates are not always the same. Usually, there is a difference of Tk2. We are moving towards that," he said, adding that the central bank is also considering the extension sought on loan repayment.