Dhaka, Bangladesh (BBN)– Country’s commercial banks continued to slash the rate of interest on deposits following rising trend in excess liquidity in the banking sector due to lower credit demand, bankers said on Friday.

According to the central bank latest data, the weighted average interest rate on deposit in the banking sector came down to 7.48 per cent in September last from 7.63 per cent a month ago. It was 7.71 per cent in July 2014.

“Most of the banks are now reluctant to collect fresh funds due to a lower credit demand amid political uncertainty,” a senior official of a leading private commercial bank (PCB) told BBN in Dhaka.

He also said the business community has adopted a ‘wait and see’ approach for expansion of their business by taking loans from the banks due to political uncertainty.

On the other hand, the weighted average interest rate on lending also declined to 12.58 per cent in September last from 12.75 per cent in the previous month of this calendar year. It was 12.84 per cent in July 2014.

However, the overall interest spread rate between the interest rates on deposit and lending fell to 5.10 per cent in September from 5.12 per cent in August last, the Bangladesh Bank (BB) data showed.

“We’re still working to bring down the spread below 5.0 per cent from the existing level to facilitate the country’s business activities,” a BB senior official told BBN.

The central bank earlier asked the commercial banks to keep interest rate spread at less than 5.0 per cent, barring operations relating to credit cards and small and medium enterprises (SMEs).
 The country’s business community earlier urged the BB Governor to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.

BBN/SSR/RZ-14Nov14-6:51pm (BST)