Bangladesh Bank (BB) has decided to re-impose a cap on the interest-rate spread of commercial banks to facilitate business activities by reducing lending costs.
The decision was taken at the central bank's board meeting held on Tuesday with BB Governor Md. Mostaqur Rahman in the chair. A number of issues, including spread and approval of the upcoming Monetary Policy Stance (MPS), were discussed in the meeting.
The latest regulatory move came at a time when business leaders have been urging the banking regulator to take immediate measures to cut policy rate and provide some relief amid the prolonged economic sluggishness.
The spread, also known as the net interest margin (NIM), represents the difference between what banks pay on deposits and what they earn from loans. In June 2018, the central bank introduced an upper ceiling on the spread, but it was withdrawn on November 28, 2023 following criticism from various quarters.
Requesting anonymity, a BB official said the board of directors decided to re-introduce a maximum average intermediation spread of 4.0 per cent between deposits and lending rates.
He said the measure is expected to support sluggish business activities by easing the burden of higher lending costs on entrepreneurs. "The BB may issue a circular on the matter at any time," he said.
However, commercial bankers have expressed their dissatisfaction with the possible move, arguing that it would undoubtedly affect banks' profitability at a time when net interest margin (NIM) across the banking sector has plummeted significantly.
On condition of anonymity, the managing director of a leading private commercial bank said it will definitely penalise the efficiency of the banks that are carefully managing liquidity in this struggling period of time.
The experienced banker also raised questions over the central bank's margin calculation method, saying that the regulator appears to be calculating the spread based only on the cost of deposits, which is not a right approach.
"There are other costs involved at the distribution level, which also needs to be taken into consideration, but it will definitely hurt profitability in this tough time when core business areas of commercial banks continue to shrink," he added.
According to Bangladesh Bank data, the banking sector's overall NIM declined from 1.30 per cent in 2024 to a negative 0.49 per cent in 2025.
In the calendar year 2025, the banking sector experienced an 8.10 percent decline in interest income alongside a 25.61-percent rise in interest expenses, the data show.
Director General of Bangladesh Institute of Bank Management (BIBM) Dr Md Ezazul Islam said the regulator had earlier capped the intermediation spread, but the outcome was not good.
The BB later withdrew the restriction and moved towards interest rate liberalization, which delivered benefits in terms of stabilising the exchange rate, strengthening forex reserve and supporting the local currency, he added.
It has also been decided in the board meeting that the policy rate will remain unchanged in the upcoming half-yearly Monetary Policy Statement (MPS) which will be announced on June 30.
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