Deposit rate cap at 12pc goes haywire
Top bankers said the situation may further fuel unhealthy competition among the banks and give rise to lending rates as well.
“If the Bangladesh Bank does not take action against the non-compliant banks, we will do it from our forum,” said Nazrul Islam Mazumder, president of Bangladesh Association of Banks (BAB), a platform for banks' directors.
BAB and Association of Bankers Bangladesh (ABB), a forum of chief executive officers, have jointly decided in June that no bank would offer more than 12 percent rates for deposit. The decision on a uniform deposit rate came into effect on July 1.
The central bank also welcomed the banks' decision on the deposit rate at 12 percent, saying it would bring down lending rate and boost industrial growth. But some banks violated it in less than two months.
It was found that the Gulshan branch of a third generation private bank has offered Bangladesh Road Transport Corporation and Bangldesh Open University 12.5 percent for deposits. Some other banks also offered as high as 13.5 percent for chunk deposits.
Chief executive officers of different banks admitted that some banks are offering higher deposit rates than the ceiling set by themselves.
“We have taken a few chunk deposits at higher rates. Now I don't need deposit as the loan-deposit ratio stands at 83 percent, less than the regulatory 85 percent,” said SA Farooqui, chief executive officer of Standard Bank.
Acting managinmg director of United Commercial Bank Shafiqul Alam said he knows some banks are violating the decision as those are in fund crisis.
“A hike in deposit rate also pushes up lending rates,” said Alam.
But he said, this was a gentleman agreement and neither the BAB nor the ABB can impose the decision.
Helal Ahmed Chowdhury, managing director of Pubali Bank, however, said it was a decision agreed by all banks.
“It (deposit cap) should be followed by all banks, otherwise there will be a distortion in the whole industry,” Chowdhury said.
He also said he would raise the issue at the next ABB meeting.