Prudent credit practices to help banks lower lending rates: BIBM
Prudent borrower selection and credit practices may help banks lower the lending rates, according to a study of Bangladesh Institute of Bank Management (BIBM).
The findings of the study titled “Interest rate and expansion of bank credit” were disclosed at a roundtable held at the BIBM yesterday.
“High interest rate increases the production cost, which negatively affects the competitiveness of the export-oriented firms. So, the lending rate should be reduced to a reasonable level,” said Nehal Ahmed, the lead author of the study.
Ahmed said adoption of modern technology in the banking operation will not only reduce the operating cost through increased efficiency but also enhance the customer satisfaction through quick delivery of services.
Many banks lend beyond their capacity just to make profits, said Helal Ahmed Chowdhury, supernumerary professor of BIBM.
“Efficient treasury management can help banks to reduce the interest rates.”
Barkat-e-Khuda, a professor of BIBM, chaired the discussion attended by Md Nazimuddin, executive director of Bangladesh Bank and director general of BIBM, as the chief guest.
Prashanta Kumar Banerjee, professor and director of BIBM, delivered the welcome speech where senior bank executives and academicians were also present.
Nazimuddin said the government, Bangladesh Bank, commercial banks and the business community have been debating on the issue of capping interest rates, both for deposit and lending.
“For the betterment of an economy, it is believed that a country should prevail low interest rate, which will ultimately stimulate the aggregate investment in the economy,” the BIBM’s director general said.
Barkat-e-Khuda said academicians may benefit from the findings of the study.
The results will establish how loan sizes relate with interest rates and therefore similar or related studies in the future could use this study as a reference material, he noted. Banerjee said outcome of this study and valuable comments by the discussants will not only enrich the findings of the study, but will also give a direction to the regulator as well as the bankers in implementing the recommendations for the betterment of the banking sector.
Mohammed Sohail Mustafa, associate professor; Rexona Yesmin, assistant professor, and Md Abdul Kayum, faculty member of BIBM, were in the study team.
