Booming stocks reflect economic health: Finance minister

Interest income of depositors in Bangladesh is much higher than in many other countries, said Finance Minister AHM Mustafa Kamal.

In many nations, people do not get any return against deposits in banks, he said, adding they instead have to pay banks to keep the money.

"This is why businessmen do not keep their money abroad. Rather, they bring money back to keep in banks here," Kamal said while talking to journalists on Thursday following a meeting of the Cabinet Committee on Public Purchase. 

Asked if depositors were counting losses because of the interest rate being lower than the inflation rate while bank shareholders were getting higher dividends, the minister said interest rates depended on the demand for loans and availability.

There is no rationale for adjusting interest rates with inflation all the time, Kamal said.

After the fixing of deposit rate at 6% and lending rate at 9%, the financial health of private banks has improved, he said.

The balance sheet of every bank is stronger with a decline in default loans. "As a result, the banks have to write off loans less than before," Kamal said, which increased profits and shareholders were getting dividends.

"There was a time when banks gave stock dividends instead of cash dividends. There were criticisms of that as well. Presently, state-owned banks are running with their own income. Earlier, the government had to inject cash into these banks."

Overall, the banking system is in good shape, Kamal said.

The interest rate was lowered considering the context of world trade, he said, adding that Bangladeshi businessmen had to compete with businessmen of other nations. Low interest rates in those countries bring down production and delivery costs.

The minister, however, said he would discuss the price increase of shares of companies that were either closed or loss-making and the disbursement of margin loans with the chairman of the Securities and Exchange Commission.

The stock market reflects the country's economy, Kamal said, adding that the stock market is booming because the economy is doing well.

Kamal said the cabinet committee had approved among many other things a procurement proposal of National Curriculum and Textbook Board (NCTB) under the Secondary and Higher Secondary Division for the printing, binding and supply of 1,07,52,840 copies of text books for Ibtedai (1st and 2nd class), secondary (Bangla and English versions), Dakhil (6th and 8th class) and technical (Trade) education through 11 bidders at a cost of around Tk25 crore.

The meeting also approved a proposal of the Roads and Highways Department for establishment and maintenance of a road research and training center that will involve an expenditure of nearly Tk251 crore.

A proposal of the Public Works Department also got the go-ahead for the construction of a 15-story residential building in Cumilla Police Lines at nearly Tk66 crore.