Speaker of the Parliament Mohamed Nasheed has offered an explanation to the high interest rates being charged by commercial and private banks.
While debating the amendment proposed by Keyodhoo MP Hussain Gasim to the Maldives Monetary Authority (MMA) Act, Speaker Nasheed said high interest rates are charged due to the increased risk as a large number of customers fail to pay back loans issued from the banks.
Nasheed revealed that 15% percent of loans issued from commercial banks are not paid back.
"As you are aware, commercial banks decide their interest rates based on the risk faced by the bank. It has come to my attention that over 15% of loans are not paid back", said Nasheed.
Nasheed said the choice given to banks to sell off mortgaged property in the circumstance that loans are unpaid is restricted. It is challenging for banks to recover the loaned funds due to the current Civil Procedure Code and the Securities Act.
"The whole financial system of the country is very restricted," said Nasheed.
Nasheed said the most important amendment proposed to the MMA Act is to the clause that dictates the principal purposes of the central bank.
Nasheed noted that positive changes will be seen in the country's economy if the central bank is given the authority to regulate the prices of goods and services instead of regulating the issuance, availability and value of Maldivian currency alone.