Interest rate on agriculture, rural credits lowered

Interest rate on agriculture, rural credits lowered

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The interest rate on agriculture and rural loans has been lowered to 11 percent from 13 percent, under a Bangladesh Bank directive.
A circular issued by the Banking Regulation and Policy Department (BRPD) of the central bank said that the rate has been lowered considering the downward trend in bank loans and deposits.According to the circular, the new rates will be effective from January 1, 2015.
The measure on the f ace of it sounds good, but banking circles disfavour government dictated rates on their loans which only nationalised banks can take knowing fully well that their capital would be refurbished from the national exchequer in case they turn into bad debt.
Banks which run of the principle of earning profit have first to be able to reduce the cost of fund which means less interest on deposits from clients to offer loans at reduced rates.
Knowledgeable sources say most banks in Bangladesh have lost their reliability as safe repositories of people’s money because of the big cases of embazzlement involving thousands of crores of Taka in recent years. In most of these cases strong outside influence on the banks have been found to be the single most important causative factor.
They say instead of distating the rate of interest, the authorities should persuade those to take yinterest at lower rates from agricultural and rural credit, or else make interest-free fund available for distribution. – GreenWatch Report

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