Sixteen private commercial banks (PCBs), out of 30, have failed to keep their commitment to slash the lending rates by the June deadline, flouting both central bank and bank owners association's advice.

"These banks did not go by their own commitment despite a passage of one month from the deadline," a senior Bangladesh Bank (BB) official said quoting the bank's July lending rates.

Bangladesh Association of Banks (BAB), a platform of bank owners, said they have nothing to do with the issue, as they cannot enforce a bank to do so.

Businesses however asked the BB to be more active and stringent in regards to enforcing the banks to follow their own pledge.

The banks that have failed to cut the interest rates are; Pubali, Uttara, AB, Islami, UCBL, ICB Islamic (Oriental), Prime, Dhaka, Al-Arafah, Social Investment, Premier, First Security, Standard, Bank Asia, Bangladesh Commerce and Jamuna Bank.

The BB on July 30 warned these 16 PCBs for not reducing the lending rates as per their commitment. The BB sent a letter to the managing directors of these banks asking them to take immediate steps to comply with their own pledge.

Earlier in March. BAB and the Association of Bankers Bangladesh, a forum of managing directors of PCBs, pledged to reduce the maximum rate for term loans for large and medium industries at a joint meeting with the BB, by over

one-percentage point to be at a maximum of 14 percent to be effective within three months, till June.

Finding that 16 PCBs failed to keep their commitment, the BB issued a letter to these banks.

“We observed that the PCBs failed to keep their commitments to make adjustments to the interest rates and this is a matter of great concern," the BB letter said last week.

BAB President Nazrul Islam Mazumder said, “We have already directed all the banks to bring down the interest rate for the productive sector, to be at a maximum of 14 percent.”

"We cannot enforce the banks to follow it," Mazumder added.

Since early this year the central bank has been pursuing the commercial banks to reduce their lending rates, which, the regulator claims, is simply too high. BB has no legal authority to enforce the banks to control their interest

rates.

The business community, including the apex trade body, Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), has also been pressing the banks and the government to slash the lending rate.

FBCCI president Annisul Huq said the interest rate is too high and without a reduction in the rate, it would be tough to compete with global competitors, where the lending rate is between 4-7 percent.

It becomes difficult for businesses to meet liquidity needs or to borrow for expansion due to the high bank rates, he said.

"We want the BB to be more active on the issue,” Huq said.

"BB should get written commitments from the banks to reduce the lending rates,” President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Anwar-Ul Alam Chowdhury Parvez said.

He said garment exporters are facing challenges due to significant hikes in utility charges and appreciation of the local currency.

"If the banks' lending rates are not cut reasonably, it will be hard for us to continue business," Parvez said.

However, a highly placed BB source said that they are planning to sit with the BAB and ABB leaders to further discuss the issue.

"We will sit with the association leaders soon,” the official said, adding that in case of failure, BB may take some punitive measures, including a halt in branch expansion and authorised dealers' licenses.

sajjad@thedailystar.net