Dhaka, Bangladesh (BBN) – The interest rate spread in the banking sector crossed 5.0 percent further in February last as the interest rate on deposit cut while the same on advances increased slightly, bankers said on Tuesday.
 

The weighted average spread between lending and deposit rates offered by the commercial banks rose to 5.06 percent in February from 4.99 per cent in the previous month. It was 5.06 percent in December last year.
 

The weighted average rate on lending stood at 13.40 per cent in February, while the average interest rate on deposits in the same month was at 8.34 per cent, according to the central bank statistics.
 

 In January last, the average lending rate was on 13.39 per cent and average deposit rate 8.40 per cent.
 

“The interest rate on deposits may fall further in the coming months due to the squeezing of investment opportunities in the wake of political uncertainty,” a senior official of a leading private commercial bank (PCB) explained.
 

The spread being maintained by at least 26 commercial banks out of 56 still ranges between more than 5.0 percent and 10.29 percent, while the average spread of the four government-owned commercial banks (SoCBs) is 3.43 percent, PCBs 5.23 percent, foreign commercial banks (FCBs) 8.65 percent and specialised banks (SBs) 3.45 percent.
 

In 2013, the spread fell to 4.99 percent for the first time in April last from 5.06 per cent in the previous month. But it was 5.13 in June after one month’s interval.
The central bank data also shows that the spread came down to 4.95 percent in October last year from 5.01 percent in September 2013. It was 4.97 per cent in November last.
 

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).
 

“We’re strengthening our monitoring and supervision for bringing down the interest rate spread at below 5.0 per cent aiming to facilitate the country’s business activities,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka.
 

Bangladesh’s business community earlier urged the central bank governor for taking initiatives to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.
 

BBN/SSR/AD-01Apr14-11:40 pm (BST)