Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to start a scrutiny of interest rate spread in the country’s banking sector following its increase slightly in February this year, officials said.
“The central bank will examine the interest rate spread situation sector-wise to know the actual level of this spread in the banking sector,” a senior official of the Bangladesh Bank (BB), the country’ central bank told BBN in Dhaka, without elaborating.
The weighted average spread between lending and deposit rates, offered by the commercial banks, rose to 5.68 percent in February from 5.63 per cent in the previous month, according to the central bank statistics.
The weighted average rate on lending operations stood at 13.63 percent in the month of February when such average rate on deposits was 7.95 percent.
The interest-rate spread in the banking sector increased slightly in the month of February as the banks hiked their lending rates to help reduce the gap between their returns on credits and their cost of funds, bankers said.
In January, the average lending rate was at 13.49 percent and the average deposit rate, at 7.86 percent, the BB data showed.
The spread, being maintained by at least 27 commercial banks out of a total of 47, is between over 5.0 percent and 12.43 percent while the average spread of the state-owned four commercial banks, private commercial banks, foreign commercial banks, specialized banks is 5.24 per cent, 5.57 per cent, 9.27 per cent and 2.38 per cent respectively.
Earlier on January 22 last, the BB asked the commercial banks to keep interest-rate spread at less than 5.0 percent, barring operations relating to credit cards and small and medium enterprises (SMEs).
“The BB is working to bring down the interest-rate spread within the desired level,” the central banker said, adding that the BB has asked the banks not to expand their consumer credit growth, beyond their total average growth of loan portfolios.
“It will also help to lower the interest rate-spread in the near future,” he noted.
The lending rate started to rise from the second week of January 2012 after the central bank lifted the cap on lending rate in all but two sectors -agriculture and export.
Earlier on January 4 last, the BB withdrew the cap on lending rate for all sectors and items, barring only two — agriculture and export — to facilitate the country’s overall economic growth, through boosting investment activities in the economy.
Besides, the lending rate ceiling on import financing for eight essential food items was withdrawn from the same day (January 4), through a BB circular relating to fixation of lending rates.
The essentials are: edible oil, gram, pulses, peas, onions, date, fruits and sugar.
The banks are now providing loans to large and medium scale industrial enterprises at rates of interest ranging between 11.50 percent and 17.00 percent and to small industries, between 13.00 percent and 21.00 percent.
Lending rates on housing loans now range between 12.00 percent and 19.50 percent and consumer credits, between 14.50 percent and 21.50 percent.
The lending rates on working capital to large and medium scale industries vary between 13.00 percent and 18.00 percent and for small industries, between 13.00 percent and 21.00 per cent.
BBN/SSR/AD-27Apr12-11:30 am (BST)
