C T Online Desk: The Bangladesh Bank on Sunday withdrew the minimum deposit rate for banks and allowed lending rate on consumers’ credit up to 12 per cent in its monetary policy announced for the second half of financial year 2022-23.
Earlier, the minimum deposit rate was the average of three months’ inflation rate, and the consumer credit refers to personal loan, and loan on car, real estate, education, etc.
The BB in its cautiously accommodative MPS also raised its policy rate by 25 basis points to contain inflationary and exchange rate pressure.
The central bank unveiled the monetary policy statement for the January-June period at a press conference held in its head office in the capital.
Considering a suitable economic condition, the nine per cent lending rate cap will be removed, according to the statement.
The relaxation of the lending rate and the removal of the deposit rate may help grow the overall deposit rate, it said.
In April 2020, the central bank imposed the lending rate cap at 9 per cent. It also levied the minimum deposit rate in August 2021.
The overall inflation soared to 9.52 per cent in August, the highest in a decade, which dropped to 9.1 per cent in September, 8.91 per cent in October, 8.85 per cent in November and 8.71 in December 2022.
In the latest MPS, the repo rate at which the central bank of a country lends money to commercial banks was raised to 6 per cent from 5.75 per cent, reverse repo rate to 4.25 per cent from 4 per cent and special repo rate to 9 per cent from 8.75 per cent on the day.
The Bangladesh Bank, however, increased domestic credit growth target to 18.5 per cent while the private sector credit growth target was kept unchanged at 14.1 per cent.
M Masrur Reaz, chairman, Policy Exchange of Bangladesh, told New Age that there were some measures in the MPS to contain inflation, but those were not enough to minimise overall inflation in the country.
The withdrawal of deposit rate ceiling and raising policy rate are welcoming steps for reducing inflation, but expanding domestic credit growth target and keeping lending rate cap are confusing, he said.
Reaz said that the central bank should have tightened credit growth and lifted lending rate limit in a bid to fight inflation.
Policy Research Institute of Bangladesh executive director Ahsan H Mansur said that the BB’s credit expansion could worse inflationary pressure after six months approximately.
