Dhaka, Bangladesh (BBN) – Most commercial banks slashed deposit rates this month while keeping their lending rates almost unchanged, officials said.

At least 20 banks — particularly the private commercial banks (PCBs) – lowered their deposit rates this month aiming to slash their cost of funds while only four commercial banks raised their lending rates, according to the central bank statistics.

“The existing trend about interest rate may facilitate investment, particularly in the productive sectors in the near future,” an executive director of the Bangladesh Bank (BB) said, adding that the central bank is monitoring the overall interest rate issue closely.

The country’s commercial banks now offer deposit rates up to 12.00 percent, in place of 14.00 percent in the previous month on fixed deposits. However, the interest rate on other savings accounts ranges between 1.00 percent and 12 percent, the BB data showed.

“Actually, we have been offering the deposit rate at a maximum of 12 percent from June 20 this year in line with our associations’ decisions,” a senior official of a leading PCB said.

In June last, two professional bodies connected with local banks — Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) — decided to follow a uniform policy on deposit rate.

The two associations have asked the private banks to cap deposit rate at 12 per cent — a move aimed at curbing a rat race among some banks to collect fresh funds in a bid to ease their liquidity pressure.

The PCB official also said they have slashed their deposit rates in an effort to cut the cost of funds and keep the lending rate at a stable level.

The lending rates started to rise from March this year after the central bank lifted the cap on it in all but two sectors — agriculture and industrial term loan.

Currently, the banks provide loans to large and medium-scale industrial plants at lending rates ranging between 12.50 percent and 13.00 percent and to small industries, between 10.50 percent and 18.00 percent.

Lending rates on housing loans now range between 10.00 percent and 18.00 percent and consumer credits, between 13.00 percent and 22.00 percent.

“Credit flow to less productive sectors including consumers’ items will be further restricted in the near future while the lending rates for priority sectors including food and agriculture will be stable,” another PCB official said.

The lending rates on working capital to large and medium scale industries vary between 8.75 percent and 16.50 percent and for small industries, between 11.50 percent and 17.30 percent.

BBN/SSR/AD-24July11-11:02 am (BST)