Tuesday, March 19, 2019 | ePaper
Loan becomes expensive
Businesses, economy brace for rate hike impact
Businesses and economy are going to be hit hard by looming hikes in interest rates for SME and industrial term loans.
Most banks are now charging 11 percent to 15 percent interest on such loans and their rates are even higher in several banks.
"Interest rates of all the commercial banks have already hit to double digit making borrowing expensive for businesses," The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President M Shafiul Islam Mohiuddin told The New Nation yesterday.
He said high interest rates have raised cost of doing business making local enterprises and export industries uncompetitive in the global arena. This could negatively impact on export growth hitting the economy hard.
"The rising interest rate is hard to handle. It also puts the entrepreneurs in danger of defaulting," said Mohiuddin, adding, "As interest rates rise, enterprises which are carrying a lot of debt will likely be forced into bankruptcy or have to take other measures to pay-off loans."
He also urged the central bank to take necessary measures to bring down the lending rates to single digit for the sake of businesses and economy.
"Banks are now hiking interest rate after struggling with bad loans, scams and deposit collection. They are now turning up the heat on the entrepreneurs to meet their rising costs," Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President M Siddiqur Rahman told The New Nation yesterday.
He said borrowing rates have already hit double digit reaching 13-15 per cent on industrial term loans. "Banks have started charging such a high rates from early this year sending a chilling effect on production," he added.
The BGMEA leader further said it has raised production cost of local apparel industries badly affecting their edge in international level. This could also adversely affect growth of apparel exports.
"The situation of the industry could get worse if the high borrowing rate prevails for a long period," he warned.
M Siddiqur Rahman also called upon the central bank to bring down the rates to single digit to help local businesses survive and accelerate economic growth.
"Lending rates came down to single digit last year helping businesses and economy to grow. But the rates have jumped to double digit again causing concern to us," Dhaka Chamber of Commerce and Industry (DCCI) President Abul Kashem Khan told The New Nation.
He said most banks have raised interest rates to make the balance between the deposit and lending. The move will hit the country's business and economy by slowing down manufacturing and job growth.
"We have to fix it now, before the looming interest rate hikes hit the economy," he added.