Dhaka, Bangladesh (BBN) – Eight private commercial banks (PCBs) hiked interest rates on deposits in October 2010 while lending rate remained almost unchanged in the country’s banking sector.

“Some banks may increase the interest rates on deposits in the upcoming months to meet growing demand for cash,” a senior official of a leading PCB said, adding that banks prefer fixed deposits to savings, even by offering higher interest rates-part of the strategy to mobilize funds.

Currently, banks offer interest rates upto 10.03 percent on fixed deposits, while the rates for savings stand at 8.50 percent, according to the central bank statistics.

“The overall interest rate spread in the banking sector may decline in the near future if the banks increase their interest rates on deposits, keeping the lending rates unchanged,” a senior official of the Bangladesh Bank (BB) said, adding that the central bank was monitoring the interest rate spread closely.

The weighted average spread between lending and deposit rates in the banking sector rose to 5.27 percent as on June 30, 2010, from 5.20 percent in March last.

The weighted average rates on lending stood at 11.23 percent in June last while the interest rates on deposit were paid at 5.96 percent by the banks.

Currently, the banks provide loans to large and medium-scale industries at interest rates ranging from 11 percent to 13 percent and to small industries at rates between 10 per cent and 18 percent.

Interest rates on housing loans hover at 9.99 percent-13.00 percent and on consumer credits at 11.50 percent-19.50 percent.

The banks’ lending rates on working capital to large and medium scale industries vary between 10 percent and 13 percent and for small industries between 11.50 percent and 17.00 percent.

BBN/SSR/AD-01Nov10-11:37 am (BST)