New governor meets bankers, expresses intent to slash interest rates to boost credit growth

Newly appointed Bangladesh Bank Governor Mostaqur Rahman at a meeting with bankers yesterday expressed his intention to boost private sector credit flow and lower interest rates to restore economic momentum.

During his first courtesy call with managing directors of banks, the governor also reaffirmed that ongoing reforms in the banking sector would continue without yielding to political pressure.

The meeting was held with representatives of the Association of Bankers, Bangladesh (ABB), the organisation representing top bank executives. According to central bank spokesperson Arif Hossain Khan, deputy governors, executive directors and managing directors of 19 banks were present.

An MD who attended the meeting, speaking on condition of anonymity, said the governor placed special emphasis on employment generation and creating an investment-friendly environment.

"During discussions on interest rates and credit growth, it was noted that private sector credit growth needs to be raised to 14-15%. To achieve this target, the governor signalled his intention of lowering lending rates," he added.

The country's private sector credit growth fell to an all-time low of 6.03% in January. According to the latest Bangladesh Bank data, credit growth edged down from 6.1% in December, continuing a sharp decline from the 10.13% recorded in July 2024.

At the meeting, the governor also said all necessary measures would be taken to stabilise the foreign exchange rate, adding that the central bank remains in a positive position to meet its reserve targets.

Emphasising accountability and transparency in banking services and decision-making, the governor said a Service Level Agreement (SLA) would be introduced to ensure that decisions on applications and other matters are communicated within a specified timeframe.

He also said regular seminars would be organised to build confidence among foreign banks and assured MDs that he would meet them regularly to resolve sector-related issues.

Reforms to continue 

Following the meeting, Mashrur Arefin, chairman of ABB, told the media that Mostaqur Rahman had pledged to continue ongoing banking sector reforms – including the reconstitution of boards at troubled banks – without yielding to political pressure.

"The new governor assured participants that he would not succumb to political influence," Mashrur said.

Bank officials were asked to inform the governor directly if they faced interference in loan disbursement or governance, he added. The central bank would also act more swiftly on issues raised by ABB.

A managing director of a first-generation private bank who attended the meeting told TBS that the governor made clear that banking reforms would move forward consistently.

He added that the central bank plans to gradually deregulate certain areas, beginning with allowing banks to independently enter into rent and leasing agreements under approved guidelines.

"Measures will also be taken to ease the release of pending export incentives, EDF repayments and remittance incentives. The governor assured that efforts would be intensified to resolve issues raised by ABB to help lower operating costs," he said.

Spokesperson Arif Hossain Khan said the governor emphasised creating a business- and production-friendly environment, with a target of generating 10 million new jobs.

He also stressed the need to ensure the productive use of distressed assets affected by non-performing loans, citing the reopening of shuttered factories for new production or service activities as an example.

The meeting also discussed the "One Village, One Product" initiative, he said. The governor provided guidance on how banks could help bring local products to global markets.

Initiatives will be taken to set service standards and establish a rental framework for office space when opening new bank branches, reducing the need for repeated approvals from the centr al bank, he added.