Scuttling all concerns of top bankers, the central bank said it wouldn't budge from its instructions on fixing the interest rates on fixed deposits commensurate with inflation so to protect depositors' interest.
The latest stance came at a meeting of the bankers online on Wednesday with Bangladesh Bank (BB) Governor Fazle Kabir in the chair, according to officials.
All the scheduled banks have been asked to take preparation to properly execute the instructions on fixing the interest rates on fixed deposits with maturity of three months and above at rates not less than the rate of inflation.
Dismissing all the worries, high-ups of the central bank told the bankers that they had issued the directive after studying the overall deposition situation in the country's banking system.
The high-ups also replied to the bankers that most of the banks declared dividend to their shareholders from 10 per cent to 30 per cent recently while depositors receive on average above 4.0 per cent returns on their fixed deposits, the officials added.
"Protection of the interests of individual depositors is a need of the time. So the directive will be implemented," the central bank's spokesperson, Serajul Islam, told the FE after the meeting was over.
Mr Islam, an executive director of the central bank, also said the individual depositors hold only 30 per cent of total deposits in all the scheduled banks.
At the meeting, MDs and CEOs of the scheduled banks expressed their fear that the profitability of banks would be hampered if the BB's latest circular on rationalisation of interest rates on term deposits are executed.
They also feared that a portion of savings and current deposits would move into the fixed or term deposits for reaping higher returns on deposits, meeting sources said.
"We've discussed the issue with the central bank," Syed Mahbubur Rahman, former chairman of the Association of Bankers, Bangladesh, told the FE in reply to a query.
Mr Rahman, also managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, said the central bank also responded to the observations made by the CEOs.
The banks have also been asked to implement the second phase of two major stimulus packages-large industries and service sectors and the cottage, micro, small and medium enterprises (CMSMEs)--worth Tk 600 billion properly to help revamp the coronavirus-hit economy.
The central bank asked the MDs and CEOs to achieve the targets of the packages on a quarterly basis through proper monitoring and supervisions, another BB official said.
At the meeting, the BB governor also announced that the central bank will provide appreciation letters to 13 banks for implementation of the stimulus package for the CMSMEs properly.
The central bank chief also named the names of banks which implemented their 100-per cent initial targets, set by the BB earlier, of the stimulus package under the CMSMEs.
These banks are BRAC, United Commercial Bank (UCB), Agrani, Uttara, Eastern, Prime, Bank Asia, Mutual Trust, Premier, Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RKUB), Modhumoti and Commercial Bank of Ceylon (CBC) PLC.
Besides, utilization of funds for startup was discussed at the meeting, the central banker added. The central bank has already formed a startup-refinancing fund worth Tk 5.0 billion aiming to develop entrepreneurship in the country.
siddique.islam@gmail.com