Rapid reduction of deposit interest rate from 8 to 5 per cent may destabilize the banking system and hinder banks in granting loans (U Than Nyein, Former Governor of the Central Bank of Myanmar)

The rapid reduction of deposit interest rate from 8 to 5 per cent is dangerous, said Than Nyein, former governor of the Central Bank of Myanmar.

“Entrepreneurs want the government to reduce the bank interest rate due to weak competitiveness. It may have an impact on the banking system when customers withdraw half of their deposits from banks. Even the withdrawal of 25 per cent of deposits by customers may destabilize the banking system. Entrepreneurs want to take low-interest loans. Banks are unable to grant loans when the people no longer deposit their money at banks. It will not be beneficial to both sides,” he added.

Entrepreneurs’ desire to reduce the interest rate is right. It is of great importance for the central bank to take account of all points as it is a monetary authority. The fact the vice-governor of the central bank discussed at the parliamentary session is also true.

“Currently, the country’s source of fund is bank deposits alone. Most of bank deposits come from low-income families. Deposit interest rates can just cover inflation. There may be unprecedented risks when the central bank reduces the interest rate immediately,” he continued.

(Eleven Media Group: http://www.elevenmyanmar.com/business/13646 )

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