In the specific relationship of the public and private sectors of the national economy, public sector investment sets the foundation of private sector growth. Public sector investment predominantly for infrastructural development in the power, port and road and railway communication as well as ICT sub-sectors acts as the facilitator of the overall economic growth by way of accelerating private investment. When private sector growth is still weak or not up to the mark, public sector investment spurs the development of the private sector. It is because of this that the government has invested in a big way for the growth of infrastructure.
At this critical juncture of the national economy, the country is in dire need of a robust and fast growing private sector for the development of the industrial and service sectors and generation of employment opportunities. But, it is universally recognised that private investment in the country has not reached the level that the national economy demands now. Costly bank loan is said to be one of the major hurdles that retard private sector investment.To come out of the impasse, the government has been trying to bring down bank loan interest rate to a single digit for quite sometime – however with little success till today. Because of high interest rate against loans, aspirant private entrepreneurs fight shy of taking necessary initiative. On the other hand, banks have their arguments as to why they are now not in a position to slash interest rates.
Against this backdrop, Bangladesh Bank – the country’s central bank has taken an initiative to assess the impact of single-digit lending interest vis-à-vis profitability of the financial institutions before introducing the same for industrial loan. The central bank is expected to prepare an assessment report on the likely impact on the banking industry after interest rates slashed down. Efforts are on to find out acceptable policies to be implemented by all banks without affecting their profitability. It is hoped that Bangladesh Bank would find the ways of bringing down lending interest rate to a single digit for accelerating economic growth.