Interest rate spread dropped significantly in April following implementation of the single-digit interest rate in the country's banking sector.
The weighted average spread between lending and deposit rates offered by the banks came down to 2.92 per cent in April 2020 from 4.07 per cent in the previous month, according to the latest official figures.
It was 4.09 per cent in February this calendar year.
The lower interest rate spread may squeeze the profitability of banks by the end of this calendar year, senior bankers said.
The interest rate on lending was brought down to 9.0 per cent on April 01 to comply with the Bangladesh Bank (BB)'s instructions while the cost of deposit remained almost unchanged, they explained.
The weighted average rate on deposits fell to 5.37 per cent in April from 5.51 per cent a month before, and interest on lending dropped to 8.29 per cent from 9.58 per cent, the BB's latest data showed.
"The overall spread narrowed significantly as the banks decreased the interest rate on lending than that of deposit," a senior executive of a leading private commercial bank (PCB) told the FE while explaining the latest interest rate situation.
He also said the interest rate spread may rise gradually if the cost of deposit decreases in the near future.