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Lower interest rates can reduce the cost of borrowing. They cannot repair broken credit discipline, restore depleted capital, or rebuild confidence. Monetary policy can support economic recovery only when the banking system is capable of allocating capital on commercial rather than political grounds.
As the prime banking regulator, Bangladesh Bank should reconsider this directive. At the bare minimum, it can remove SME loans from it, just like consumer loans were omitted. Ideally, scrapping the regulation altogether and replacing it with a policy rate cut would be a better way to bring down lending rates.
The Monetary Policy Statement was announced in the last week of June, and was almost immediately hemmed in by the circular announcing the spread cap -- a sequencing that signals incoherence. And that incoherence matters more than the actual policy. Macroeconomic policy cannot be effective in supporting growth or curbing inflation unless it is credible.
In structural terms, the policy reflects an ongoing evolution in Bangladesh’s financial regulatory framework -- from rigid quantitative controls toward more dynamic, risk-sensitive calibration.
