Bank interest rate spread crosses 5 per cent again

FE Report
The interest rate spread in the country's banking sector crossed 5.0 per cent again in February as the interest rate on deposit decreased while the same on advances remained almost unchanged.
"The interest rate on deposits may fall further in the coming months due to the squeezing of investment opportunities in the wake of political uncertainty," a senior official of a leading private commercial bank (PCB) told the FE Tuesday.
The weighted average spread between lending and deposit rates offered by the commercial banks rose to 5.06 per cent in February last from 4.99 per cent in the previous month, according to the central bank statistics.
The weighted average rate on lending stood at 13.40 per cent in February, while the average interest rate on deposits in the same month was at 8.34 per cent.
In January last, the average lending rate was on 13.39 per cent and average deposit rate 8.40 per cent.
The spread being maintained by at least 26 commercial banks out of 56 still ranges between more than 5.0 per cent and 10.29 per cent, while the average spread of the four government-owned commercial banks (SoCBs) is 3.43 per cent, PCBs 5.23 per cent, foreign commercial banks (FCBs) 8.65 per cent and specialised banks (SBs) 3.45  per cent.
In 2013, the spread fell to 4.99 per cent for the first time in April last from 5.06 per cent in the previous month. But it was 5.13 in June after one month's interval.
The Bangladesh Bank (BB) data also shows that the spread came down to 4.95 per cent in October last year from 5.01 per cent in September 2013. It was 4.97 per cent in November last.
The central bank earlier asked the commercial banks to keep interest rate spread at less than 5.0 per cent, barring operations relating to credit cards and small and medium enterprises (SMEs).
"We're trying to bring down the interest rate spread at below 5.0 per cent to facilitate the country's business activities," a BB senior official told the FE without elaborating.
The country's business community earlier urged the BB Governor for taking initiatives to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.