Muhammad Abdul Mazid, Former chairman, National Board of Revenue (NBR) :
Deposit is the source of power for any bank. The deposited money is the driving force for the overall business activities of a bank. The interest rate of the money deposited in the banks should be motivational. Otherwise, the depositors will shift their bank deposits to elsewhere.
The banks will face a liquidity crunch if they fail to satisfy the depositors. A situation will emerge where the banks will lose their lending capacity.
It will not be a pragmatic step if lending by lowering the interest rate becomes the first consideration. Before lending money, the banks should think if they could recover the loans. How the banks will lend money if they do not have sufficient deposits?

Bank spread is the difference between the interest rate that a bank charges a borrower and the interest rate a bank pays a depositor.

A bank must have 4%-5% spread to maintain its existence in the market. Now if the lending rate is fixed by 9%, the banks will not be able to give more than 4%-5% interest to the depositors.

4%-5% rate of interest will be acceptable to the depositors if inflation rate remains lower. If the inflation rate remains 6%, then depositors will not want to keep money in the banks at 5% interest rate. Naturally, a depositor will not allow his deposit to be shrunk. Therefore, a depositor will consider the matter first. An acceptable and profitable interest rate on bank deposits is necessary for raising a lendable fund for a bank.

Based on an interview by Ashiq Rahman, translated by Hossen Sohel