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percentage points for term loans to small industry, central bank data
show. These banks are United Commercial Bank (UCB) and Southeast
Bank.Term loan is a lending for a certain period that ranges from six
months to five years. However, two foreign banks -- State Bank of
India and HSBC--- have raised the lending rate up to 2 percentage
points in August from what the July was. Presently, 48 banks,
including the state-run ones, are in operation in the country. The
rates that other 44 banks charge remain unchanged, according to
Economic Trends, a flagship monthly publication of Bangladesh Bank.
The Economic Trend's August issue showed UCB's lending rate for small
industries is 13.25 percent in August, while it was 14.75 percent
the previous month. Southeast Bank slashed the rate by 1.5-
percentage point to 15 percent from 16.5 percent in July. Hong Kong
and Shanghai Banking Corporation, widely known as HSBC Bank, has kept
the rate unchanged at 13 percent in sub-sector category 1. The
rate under sub-category-2 was raised by 2 percentage points to 15.5
percent in August from 13.5 percent in July. "We have cut the
interest rate for loans to small industry to support business growth,"
Shahjahan Bhuiyan, managing director of UCB, told The Daily Star.
Bhuiyan said the UCB has cut the rate in line with the recent deposit
rate cut move by private banks. Mahbub-ur Rahman, head of corporate
affairs of HSBC, however denied any rate hike for small industrial
credit in the last three months. Of the 48 banks, 30 are private,
nine foreign, four state-owned commercial banks and five specialised
banks. Businesses often blame banks for charging higher interest
rate, which small and medium enterprises (SME) deem a burden. Despite
the latest rate cut, small industrial lending rate remains higher
that it is meant for medium and large industries. Even UCB charges 13
percent interest for loans to medium and large industries, whereas
such rate for small industrial credit is 13.25 percent. Southeast
takes only 13 percent interest against its loans to medium and large
industries, while the rate is 15 percent for small ones despite the
latest move. According to BB data, The City Bank charges 16.5 percent
for loans to small industries, while it is 13 percent for large and
medium scale industries. Bangladesh Commerce Bank and BRAC Bank
charge small industries 18 percent and 16. 30 percent lending rates
respectively. Most private banks fix at least 14 percent interest
for such lending. The rates offered by four state banks Sonali,
Janata, Agrani and Rupaliare relatively lower-- between 12 percent
and 12.50 percent. "Parleys on easy loans to small entrepreneurs
took place several times, but it happens rarely," said Nasreen Awal
Mintoo, the past president of Women Entrepreneurs Association of
Bangladesh. She said many small entrepreneurs, especially women, now
feel discouraged to go for bank borrowing fearing that they will not
be able to repay a bigger amount. Mahbub-ur Rahman of HSBC attributed
the higher cost for small industry loans to risk parameters.
"Overhead monitoring cost for such loans is also higher than other
loans," he noted.
