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Drastic cut in savings interests

Bank rate reduced

By Staff Correspondent
Finance Minister M Sai fur Rahman yesterday announced a one-half percentage point cut in the Bank Rate from the existing nine per cent and sharp reductions in the interest rates on both Savings Accounts and savings certificates.
Briefing newsmen on the wide-ranging changes in the financial sector, in the conference room of the Ministry, the Finance Minister said that new laws would soon be formulated to regulate the capital issues market and non-banking financial sectors. He also said that both the Banking Companies Act and the Commercial Court Act would be amended.
He said that effective without further delay' the Bangladesh Bank commercial lending Interest rate (Bank Rate) would be reduced to 8.5 per cent and the 'yield rale' on all
types of savings certificates, except the Wage Earners Bond, would be rationalised' downwards.
Saying that the interest rate on savings accounts was 'high', he said, it would be lowered by 1.5 percentage points from 7.5 to 6 per cent while the rale on fixed deposit accounts (up to six months) would be reduced from 8.5 per cent to 7.5 per cent.
The various steps were tn line with the government s financial sector reform programme. Saifur Rahman said, adding that they were designed to ’activate the economy. develop capital markers and facilitate the release of funds for investments."
He also announced the Introduction of open market auction sale of the 91 -day term Treasury Bills "to foster frec-
market economy" and the gov emment decision to release a new three-year-term National Investment Bond soon
The new bonds would be of two separate types. One with a predetermined annual Interest rate averaging 12 per cent while the yield of the other would be on a 'floating or profit sharing basis' which would be determined by adding the annual inflation rate and the growth rate In the Gross Domestic Product (GDI!
The second type would also be consistent with the Islamic policy of non-Interest saving, he added.
The export sector-lending rate would also be reduced from 7.5-11 per cent to 7.5-10.5 per cent while the gov emment subsidy would be reduced from one per cent to 0.75 per cent.
Describing it "one of the most important elements to develop the capital markets" he said that a Securities and Exchange Authority would be appointed soon. Securities and exchange laws had already been formulated and would be sent for review to the Law Ministry.
Saifur Rahman said that the Non-Banking Financial Institution Act was In the process of formulation to define func-Uon* and parameters and for more effective regulation.
The Banking Companies Act would also be amended to provide an "Increased supervisory and inspection" role for the regulators, he said.
The Commercial Court Act hnd already been amended un dcr a presidential ordinance issued on the day for "quick
recovery of outstanding bank loans.' he added.
The Finance Minister said that the government was considering formulating a bankruptcy law or insolvency act similar to that In the United States or In Great Britain
Saying that the Interest rates on the Defence Savings Certificate were atrociously high . the Minister said that their yield had been rcfixcd at 18 per cent instead of the cur rent 21 per cent.
Similarly, the yield of the live year term Bangladesh Sav 1ngs Certificate would be re-
duced to IS per cent from the current rate of 18 per cent while that on the one with a three year-term would be 15
The investment celling for the five year term certificate has been raised to Taka ftve lakh from the existing Taka three lakh In one name and Taka 10 lakh from Tk Mx lakh In Joint names
The rate for the Wage Earners Development Bond would remain the same at 10 per cent while that for the Postal Savings Certificate (general) had been reduced to eight pc cent from the current rale of 11.5 per cent and that for the Ihree-ycar-term one from 19.55 per cent to 15 per cent.
In his concluding remarks, the Finance Minister said that these monetary measures were steps towards internal resource mobilisation and a self-reliant economic growth