Dhaka, Bangladesh (BBN)– Interest rate spread in the country’s banking sector declined in April as the banks hiked deposit rates to ease growing pressure on their liquidity while the lending rate was almost unchanged, officials said.
The weighted average spread between lending and deposit rates offered by the commercial banks came down to 4.85 per cent in April from 5.15 per cent in the previous month, according to the central bank statistics.
“The downward spread trend may continue in the near future as the commercial banks have committed to follow a uniform policy on deposit rate,” an executive director of the Bangladesh Bank (BB) said on Saturday.
The weighted average rate on lending stood at 12.83 per cent in April while the interest rates on deposits were paid at 7.98 per cent, the BB data showed.
In March, the average lending rate was on 12.82 per cent and average deposit rate 7.67 per cent.
Last month the Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) decided to follow a uniform policy on deposit rate.
The two trade bodies linked to banks have asked the private banks to cap deposit rate at 12 per cent — a move aimed at curbing a rat race among some banks to collect fresh funds in a bid to ease their liquidity pressure.
“The banks, particularly private commercial banks (PCBs), offered the interest rate on deposit at a maximum 12 per cent from June 20 this year in line with the associations’ decisions,” a senior private banker said.
He also said the banks have cut interest rates on deposit in an effort to slash cost of funds and keep the lending rate stable.
The lending rate has started to rise from March this year after the central bank lifted the cap on lending rate in all but two sectors — agriculture and industrial term loan.
Currently, the banks provide loans to large and medium scale industrial plants at interest rates ranging between 12.50 per cent and 13.00 per cent and to small industries between 10.50 per cent and 17.30 per cent.
Interest rates on housing loans now range from 10.00 per cent to 18.00 per cent and consumer credits between 13.00 per cent and 22.00 per cent.
The lending rates on working capital to large and medium scale industries vary between 10.25 per cent and 18.00 per cent and for small industries between 12.00 per cent and 17.30 per cent.
BBN/SSR/AD-10July11-12:23 pm (BST)
