Some banks start slashing interest rates on deposits

FE Team | Published: March 24, 2009 00:00:00 | Updated: February 01, 2018 00:00:00

Siddique Islam
The commercial banks have started slashing their interest rates on deposit this month in line with the central bank's latest interest rate policy.
At least eight commercial banks decreased interest rates on deposit in the current month, while interest rates on lending remained almost the same in the country's banking sector, officials said.
On March 11 last, the Bangladesh Bank (BB) slashed its interest rate on repurchase agreement (repo) and reverse repo after nearly seven months aiming to offset the ongoing global financial recession through boosting fresh investment.
"Slashing interest rates on deposit by the commercial banks will encourage investment of fresh funds in different sectors that would also help offset the impact of ongoing global economic recession on the country's economy," a BB senior official told the FE Monday.
Commercial bank officials, however, said a good number of banks are now in a position of over liquidity, as a declining trend in fresh credit was perceptible these days.
"Market is now having more liquidity than the end of the last calendar year because of falling trend of import payments and export performances recently," the chief executive officer of a private commercial bank told the FE.
He also said more banks might also cut their interest rates on deposit in the next months in line with the BB directive.
Meanwhile, only one commercial bank reduced its interest rates on lending this month, while two banks raised interest rates on lending for different sectors, the BB officials said.
"At least six more commercial banks have completed official formalities to cut their interest rates on lending in line with the Bangladesh Association of Banks (BAB) commitment," another BB official told the FE.
On March 3, 2008, BAB proposed to the central bank to 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 production sector will be brought down to 14.50 per cent from the existing 15.50 per cent.
He also said the central bank sent letters to seven commercial banks in February last asking them to reduce their interest rates on lending as per the BAB proposals.
The country's commercial banks are now offering interests in the range between 5.25 per cent and 13.50 per cent on fixed deposit schemes, while the rates for saving accounts varies between 2.50 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 15 per cent and to small industries between 10 per cent and 16.50 per cent.
Interest rates on housing loans range between 11.50 per cent and 16.00 per cent and consumer credits 10.50 per cent and 19.00 per cent.
The banks lending rates on working capital to large and medium scale industries range between 10.50 per cent and 16.00 per cent and for small industries between 10.50 per cent and 16.50 per cent, the BB data showed.