Once the painful decision is taken, the interest rates on the popular savings certificates would be rationalised down to the level of average interest rates on the treasury bills, said a senior government official.

He said the rates would be market-determined ones.

The interest rates on T-bills averaged at around 8 per cent in last one year with a declining trend to go down further in next 2-3 months, according to Bangladesh Bank.

At present, there are two savings instruments in operation - 5-year Bangladesh savings certificates and 3-year savings certificates with quarterly profits - with maximum interest rates of 12 per cent.

Meanwhile, Bangladesh Bank Governor Fakhruddin Ahmed at a meeting yesterday advised the chief executives of all local commercial banks to decide on their own to reduce the interest rates.

The governor suggested them, especially the PCBs, to sit together and evolve strategies to bring down the lending rates, the central bank's Deputy Governor Nazrul Huda told newsmen following the meeting at the bank with the governor in the chair.

The meeting observed that the present levels of interest rate remained very high even compared to neighbouring countries like India and Pakistan. The margin between the deposit rates and lending rates is also very high.

"At this very high rates of interest, there is little prospect for investment and the economy is unlikely to grow," Huda quoted the Governor as saying.

He said the Governor also reminded the bankers of the central banks of the ongoing efforts to give market signals to ease the money market that has already brought down the interest rates on T-bills, REPO (repurchase agreement) and reverse REPO.

The deputy governor felt that the difference (margin) between deposit and lending rates, which is now around 7 per cent, should be around 3 per cent to boost investment.

The government on various occasions in the past advised to lower the lending rates, but the commercial banks, especially the private sector ones, have so far responded poorly on the plea that they have to collect funds with high interest rates to the depositors.

They often argue that the interest rates of the government savings certificate should be lowered first to enable the private banks to lower their lending rates.

Even the nationalised commercial banks frustrated the government as they failed to respond to call for lowering interest rates. NCBs, which are burdened with huge bad loan portfolio, are reluctant to reduce their interest rates.

Most of the banks maintain lending rates between 13 per cent and 16.5 per cent for term loans while 7-10 per cent for export credits, which is much higher than the rates in neighbouring countries, including India and Pakistan.