Interest rates on deposits rose while they fell on lending in commercial banks in the current month to narrow the spread, officials said.
At least 13 commercial banks raised the interest rates on deposits in July to reduce the spread between lending and deposit rates aiming to encourage people to keep their money with banks.
The commercial banks have raised interest rates on deposit by 0.25 to 1.50 percentage points to collect fresh funds from general depositors.
On the other hand, at least nine out of 48 banks have reduced interest rates on lending this month in line with the commitments made by the Bangladesh Association of Banks (BAB) to the central bank.
On March 3 last, the BAB proposed to the central bank that they will reduce interest rates on industrial term loans to 14.75 per cent from the existing 16.00 per cent while the interest rates for the productive sector will be brought down to 14.50 per cent from existing 15.50 per cent.
The PCBs also gave commitment to the BB that they would bring down such lending rates within the next three months.
On May 18 last, the PCBs also agreed at a joint meeting to charge interest rates of 14 per cent in maximum on term loan and working capital against the existing 16-17 per cent.
They also agreed that the new interest rates would come into effect from July, 2008.
The banks have slashed their interest rates by 0.25 to 2.25 percentage points for mainly term loan and working capital, they added.
"We expect more banks to cut their lending rates on productive sectors from the next month," a senior official of the Bangladesh Bank (BB) told the FE Thursday.
He also said the spread between interest rate on lending and deposit may slightly come down during April-June period of this year.
Most commercial banks are still maintaining a spread of over 5.0 per cent, although the difference between deposit and lending rates slightly narrowed in March over that of December last, the official added.
The weighted average spread between lending and deposit rates in the country's banking sector came down to 5.75 per cent in March last from 6.05 per cent in December, according to the central bank statistics.
"The banks should reduce interest rates on lending in line with their commitment," Managing Director of the National Credit and Commerce (NCC) Bank Limited Nurual Amin told the FE.
Amin, who is also Vice-Chairman of the Association of Bankers, Bangladesh (ABB), said the some banks have already slashed interest rates on lending on the basis of their commitment.
"We are expecting that more banks will reduce their interest rates on lending in the next month," he said, adding that the matter will be discussed in the next meeting of the ABB.
The country's commercial banks currently offer interest from 5.50 per cent to 13.00 per cent on fixed deposit schemes while the rates for saving accounts varies between 3.75 per cent and 8.00 per cent, according to the central bank statistics.
Bankers and experts, however, said the real interest rate in the country is still low and, to some extent, negative because of high inflation rate that was 9.87 cent in May last. As a result, the banks are raising the interest rates on deposit to attract more deposits from their clients.
The banks' lending rates on working capital range between 10.50 per cent and 16.30 per cent while export credit is offered at seven per cent, the BB's data shows.
Currently, the banks provide loans to large and medium scale industries at interest rates ranging between 11 per cent and 16 per cent and to small industries between 10 per cent and 16.30 per cent.
Interest rates on housing loans range between 10 per cent and 16.50 per cent and consumer credits 10.50 per cent and 19.50 per cent.
