BB boss downplays jitters over excess liquidity

Bangladesh Bank Governor Dr Atiur Rahman yesterday played down
worries over the level of excess liquidity in banks and said the
condition would rather favour investors. "This is the time for
investors to borrow money at a lower interest rate," said Rahman in
his address to a half-yearly business conference of the state-owned
Janata Bank at Biam auditorium in the city. The global financial
crisis has made money costlier in many countries, including India,
but the situation is reverse in Bangladesh, the central bank chief
said. The banking sector in Bangladesh is awash with excess liquidity
worth nearly Tk 30 ,000 crore due to a sharp decline in investment
demand. The governor however said banks have invested their idle money
in the central bank's investment tools, such as treasury bonds and
bills. "The real excess liquidity will be worth Tk 7,500 crore," said
Rahman. The governor also focused on the interest rate, farm credit,
foreign exchange reserve and separate pay-scale for state-owned bank
officials. Rahman said he supports the idea of separate pay scale for
all state-owned commercial banks and the central bank as well.
"Reduction of corporate tax by 2.5 percentage points should be
reflected in the interest rate," Rahman said. He said Bangladesh Bank
is trying to bring the interest rate down to a single digit. "But it
won' t be too easy," he said. The banking system in Bangladesh is
often blamed for high interest rates ranging from 12 percent to 18
percent. A couple of months ago, the BB capped the lending rate for
some sectors at 13 percent. Economist Qazi Kholiquzzaman Ahmad
stressed the need to expand banking services to rural areas. Janata
Bank Chairman Suhel Ahmed Chowdhury and Managing Director SM Aminur
Rahman also spoke.