Interest rates on savings deposits likely to go up

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Siddique Islam
The interest rates on savings deposits with banks are likely to go up from next month following the central bank's decision to make the reporting on the special notice deposit (SND) accounts mandatory, officials said Monday.
"The commercial banks will have to increase the interest rates on savings deposits if they offer higher interest on SND," a senior official of the Bangladesh Bank (BB) told the FE.
The interest rates on SND accounts cannot be higher than the normal saving deposit accounts, according to the new provisions issued by the BB recently.
The official said the interest rates on SND have to be reported to the central bank regularly to create a level playing field among the banks for collection of fresh funds from depositors.
Under the existing provisions, depositors have to notify the banks at least seven days in advance for withdrawing cash from the SND accounts.
Meanwhile, at least seven commercial banks have decreased interest rates on deposits in the current month, while interest rates on lending remained almost the same in the country's banking sector.
"The overall interest rate spread may decline in the coming months if the banks increase their interest rates on deposits keeping the lending rates unchanged," another BB official said.
He said the central bank is monitoring the interest rate spread closely.
The country's commercial banks now offer interest rates ranging between 1.25 per cent and 10.03 per cent on fixed deposits, while the rates for savings accounts vary between 1.00 per cent and 8.00 per cent, according to the central bank statistics.
Currently, the banks provide loans to large and medium-scale industries at interest rates ranging between 11 per cent and 13 per cent and to small industries at rates between 10 per cent and 18 per cent.
Interest rates on housing loans range between 11.75 per cent and 13.00 per cent and on consumer credits between 11.50 per cent and 19.50 per cent.
The banks' lending rates on working capital to large and medium scale industries vary between 10.50 per cent and 13 per cent and for small industries between 11.50 per cent and 16.50 per cent.