The weighted average interest rates on both deposits and advances increased in the fourth quarter (October-December) of 2024, according to a latest report of Bangladesh Bank.
Bankers said some banks that are grappling with liquidity shortage offered higher rates to attract deposits, pushing the rates higher
The average deposit rate at the end of December last stood at 6.04 per cent, rising 2.7 percentage points from the previous quarter (July-September), according to BB data.
As a result, the total deposit (excluding interbank items) of the scheduled banks increased by 3.2 per cent to Tk.18.84 trillion in Q4 although the lending rates remained sluggish on back of dimmed private sector growth.
Meanwhile, the weighted average interest rate on advances (lending) reached 12.05 per cent in Q4, marking an increase of more than 1.0 percentage point from Q3.
This implies that some weaker banks offered higher interest rates on deposits during the quarter under review.
The banking industry has been facing a liquidity crisis since 2023, amid reports that certain business groups-including Chattogram-based S Alam Group-were involved in siphoning off funds from the banks.
As a result, depositors withdraw their savings, prompting several banks, including major shariah-based financial institutions, to seek emergency liquidity support from the central bank as a last resort.
According to the central bank report, the weighted average interest rates on all deposits during the review period were: State-owned banks 5.35 per cent, domestic private commercial banks 6.22 per cent, foreign commercial banks 1.72 per cent, specialised banks 7.19 per cent, and Islamic banks 6.98 per cent.
For savings deposits, the rates offered were: state-owned banks 3.06 per cent, domestic private banks 2.5 per cent, foreign commercial banks 0.88 per cent, specialised banks 4.31 per cent, and Islamic banks 3.34 per cent.
For fixed deposits, the rates were: state-owned banks 8.79 per cent, domestic private banks 9.81 per cent, foreign commercial banks 6.48 per cent, specialised banks 8.74 per cent, and Islamic banks 9.91 per cent.
For fixed deposits with the tenure from six months to less than one year, the rates offered were: state-owned banks 9.35 per cent, domestic commercial banks 10.15 per cent, foreign commercial banks 7.48 per cent, specialised banks 8.85 per cent, and Islamic banks 10.59 per cent.
The weighted average interest rates (as of December 31, 2024) on working capital financing loans were: state-owned banks 12 per cent, domestic commercial banks 12.86 per cent, foreign commercial banks 12.18 per cent, specialised banks 11.17 per cent, and Islamic banks 12.35 per cent.
For term loans, the rates charged were: state-owned banks 11.9 per cent, domestic commercial banks 12.67 per cent, foreign commercial banks 10.76 per cent, specialised banks 12.86 per cent, and Islamic banks 12.83 per cent.
Bankers say the interest rates were up as some banks had offered higher rates on deposits to attract deposits.
They said that the upward trend would prevail during this current quarter (Q1) to end this month (March).
Syed Mahbubur Rahman, managing director and CEO of privately-owned commercial bank Mutual Trust Bank (MTB) said: "There were some banks behind the rate rises in the banking sector."
"Not only shariah-based banks, there were some private commercial banks that offered much higher rates on deposits to attract the deposits," he said, adding that the upward trend will also prevail in the current quarter (January-March) or first quarter of this year.
"I don't see any downward rates in this quarter, and even these may increase as some banks remain aggressive to attract the deposits to survive."
jasimharoon@yahoo.com
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