Dhaka, Bangladesh (BBN)- Overall interest-rate spread in the country’s banking sector almost remained unchanged in April as commercial banks slashed interests on deposits more than on lending.
The weighted average spread between lending and deposit rates offered by the commercial banks rose to 4.87 per cent in April 2016 from 4.86 per cent in the previous month, according to the central bank’s latest statistics.
The spread was 4.81 per cent in February 2016.
On the other hand, the weighted average rates on deposits came down to 5.77 per cent in April from 5.92 per cent in the previous month while interest rates on loans dropped to 10.64 per cent from 10.78 per cent.
The Bangladesh Bank (BB) data shows in April the weighted average rate on lending stood at 9.70 per cent at the state-owned commercial banks (SoCBs), 9.49 per cent at the specialised banks (SBs), 9.17 per cent at the foreign commercial banks (FCBs), and 11.03 per cent at the private commercial banks (PCBs).
On the other hand, the weighted average rate on deposit in April stood at 5.67 per cent at the SoCBs, 7.54 per cent at the SBs, 6.0 per cent at the PCBs, and 1.96 per cent at the FCBs.
Senior bankers, however, foresee that the interest-rate spread may decrease further in the coming months as some banks offer lower interest rates on lending to their clients, particularly corporate ones.
Talking to the BBN, a senior official of a leading private commercial bank said they are offering interest rates on short-term lending at 7.0 per cent to their corporate clients.
“We’re now offering such low-cost loans only to the corporate clients for using our excess liquidity,” the private banker explained.
The overall excess liquidity with the commercial banks stood at around BDT 1.05 trillion as of April 7 last but major portion of the funds has been invested in the risk-free government securities, according to a senior official of the Bangladesh Bank (BB).
He also said excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around BDT 36 billion.
The overall excess liquidity with the commercial banks was around BDT 1.23 trillion a month ago, he added.
The spread being maintained by at least 23 commercial banks out of 56 still ranges as high as between more than 5.0 per cent and 9.56 per cent.
Average spread with the six SoCBs is 4.03 per cent, PCBs 5.03 per cent, FCBs 7.21 per cent and SBs 1.95 per cent.
“We’re still working to bring the spread down to nearly 4.0 per cent shortly from the existing level,” the BB official said.
The central bank advices the banks to cut down the interest-rate spread through reducing their volume of classified loans, he added.
BBN/SSR/AD