Interest rate spread below 5pc in Jan

The interest rate spread in the country's banking sector came down to below 5.0 per cent again in January with the increase in competition among the banks for attracting well performing clients.
"We're are now offering lower interest rate on lending for corporate entities that now prefer foreign currency loan from overseas sources due mainly to lower interest rate," a senior official at a leading private commercial bank (PCB) told the FE Wednesday.
The weighted average spread between lending and deposit rates offered by the commercial banks came down to 4.99 per cent in January 2014 from 5.06 per cent in the previous month, according to the central bank statistics.
 "A good number of banks have already slashed interest rates on lending, aiming to expedite their credit flow to the private sector in line with the Bangladesh Bank (BB) advice," the private banker noted.
He also said the declining trend of spread may go on in the coming months if such competition among the banks continues.
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 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 weighted average rate on lending came down to 13.39 per cent in January, while the interest rates on deposits were paid at 8.40 per cent.
In December last, the average lending rate was at 13.45 per cent and average deposit rate at 8.39 per cent.
The spread maintained by at least 24 commercial banks out of 56 still ranges between more than 5.0 and 10.59, while the average spread of the four government-owned commercial banks (SoCBs) is 3.43 per cent, PCBs 5.17 per cent, foreign commercial banks (FCBs) 8.71 per cent and specialised banks (SBs) 3.29  per cent.
The BB 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've already strengthened our monitoring and supervision for keeping the interest rate spread at below 5.0 per cent aiming to facilitate the country's business activities," a BB senior official told the FE without elaborating.
The country's business community earlier urged the central bank governor to take initiatives to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.