Banks’ Aug interest rate spread falls

Overall interest rate spread in the country's banking sector fell slightly further in August as the commercial banks are slashing their lending rates to attract clients, particularly corporate ones, bankers said.
The weighted average spread between lending and deposit rates offered by the commercial banks came down to 4.77 per cent in August last from 4.79 per cent in the previous month as the interest rates on lending decreased more than that of deposits.
The spread was 4.87 per cent in June 2014.
On the other hand, the weighted average rates on deposits came down to 6.74 per cent in August last from 6.78 per cent in the previous month while interest rates on lending dropped to 11.51 per cent from 11.57 per cent, according to the central bank statistics, released Thursday.
"The declining trend of overall interest rate spread may continue in the coming months following sufficient excess liquidity with the banks," a senior official of a leading private commercial bank (PCB) told the FE.
Some commercial banks are now offering lending rates below 10 per cent to attract good performing corporate clients to expedite their business activities, the private banker explained.
"More than 15 banks are still heavily burdened with excess liquidity because of lower credit demand from the businesses engaged in both trade and industrial operations," he noted.
Talking to the FE, SK Sur Chowdhury, deputy governor of the Bangladesh Bank (BB), said the central bank is persuading the commercial banks to bring down the spread to nearly 4.0 per cent shortly from the existing level.
He also said the central bank already advised the bankers to take necessary measures in this connection.
"The falling trend of overall interest rate spread in the country's banking sector continued in the recent months mainly due to strict monitoring and supervision of the central bank," the deputy governor explained.
The spread being maintained by at least 20 commercial banks out of 56 ranged between more than 5.0 per cent and 9.74 per cent, the BB data shows.
The average spread at the six state-owned commercial banks (SoCBs) was 3.60 per cent. For the PCBs it was 4.99 per cent, foreign commercial banks (FCBs) 7.61 per cent and specialised banks (SBs) 2.15 per cent.
Country's business community earlier urged the central bank governor to take initiatives to lower the lending rates to facilitate business activities, particularly to help augment industrialisation in the country.
    [email protected]