Dhaka, Bangladesh (BBN)- Most of the commercial banks slashed interest rates on deposits this month with a view to reducing their cost of funds, bankers said in Dhaka on Sunday.

The latest move of the banks would boost the lending to the private sector which has fallen in the recent months. The lower than usual demand for credit from the private sector is attributed mainly to the ongoing global economic recession.

“We’ve slashed the interest rates on deposit to help reduce the cost of funds and maintain an acceptable interest spread between return on loans and advances and cost of deposits,” Managing Director and Chief Executive Officer of the Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told BBN in Dhaka while explaining the main objective of the latest initiative.

The country’s commercial banks now offer interest rates ranging from 3.00 per cent  to 12.77 per cent on fixed deposit schemes, while the rates for saving accounts varies between 1.00 per cent and 8.00 per cent, according to the central bank statistics, released on Sunday.

“We’ve reduced the interest rates on deposit to minimize our cost of funds,” Chairman of the Association of Bankers Bangladesh (ABB) K Mahmood Sattar told BBN in the capital, adding that most of the banks have re-fixed the interest rates on deposit in line with the ABB’s decision.

Most of the banks, however, are offering interest rates on fixed deposit schemes ranging between 9.00 per cent and 9.50 per cent on the basis of the ABB decision.

At least 23 commercial banks have announced cutting of deposit rates, keeping the interest rates on lending almost unchanged in the month of June this year, the Bangladesh Bank (BB), the country’s central bank, officials said.

“Slashing interest rates on deposits will encourage investment of fresh funds in different sectors and help offset the impact of ongoing global economic recession,” a BB senior official told BBN.  

He also said the central bank is monitoring closely the implementation of instruction relating to the reduction of interest rates on lending in five key sectors at maximum 13 per cent.

On April 19 last, the central bank of Bangladesh asked the commercial banks to fix the interest ceiling on lending in five specific areas at maximum 13 per cent to help mitigate the impact of the ongoing global economic meltdown.

BBN/SS/SI/AD-22June09-12:55 am (BST)