Spread between bank lending, deposit rates falls marginally
Monday, 22 December 2008
Siddique Islam
The spread between lending and deposit rates of commercial banks declined marginally to 5.18 per cent in September, following the central bank's dogged persuasion to lower it, at least to 5.0 per cent.
"We expect that the spread would decline further during September-December period this calendar year," a senior official of the Bangladesh Bank (BB) told the FE Sunday.
The weighted average spread between lending and deposit rates in the country's banking sector came down to 5.18 per cent as on September 30, 2008 from 5.34 per cent of June, according to the central bank statistics.
"The central bank will keep continuing its persuasion until the spread come down to 5.0 per cent from the existing level," another BB senior official said.
The weighted average rates on lending stood at 12.35 per cent in September, while the banks paid interests on deposit at 7.17 per cent.
During the period, the weighted average rates on lending stood at 12.35 per cent from 12.29 per cent, while the interest rates on deposit rose to 7.17 per cent from 6.95 per cent, the BB's data showed.
On the other hand, most of the commercial banks, particularly private commercial banks (PCBs) have recently reduced the interest rates on lending in line with the advice of the Bangladesh Association of Banks (BAB).
On March 3, the BAB assured the central bank that its members would reduce interest rates on industrial term loans to 14.75 per cent from the existing 16 per cent, while the same for the productive sectors to 14.50 per cent from existing 15.50 per cent.
"We want the banks to reduce the interest rate spread to 5.0 per cent by improving their efficiency level," the BB official added.
However, Association of Bankers, Bangladesh (ABB) Chairman K Mahmood Sattar told the FE that the existing downward trend in the interest rate spread would continue in the near future also.
"We are hopeful about declining the interest rate spread to 5.0 per cent by the end of this calendar year," he added.
The spread being maintained by at least 17 commercial banks out of 48 are still between over 5.0 per cent and 11.72 per cent, while the average spread of the four government-owned commercial banks, PCBs, foreign commercial banks (FCBs) and specialised banks (SBs) are 4.54 per cent, 4.77 per cent, 9.35 per cent and 2.95 per cent respectively.
The country's business community earlier urged the governor of the central bank for taking initiatives to reduce lending rates to facilitate business activities, particularly to augment industrialisation in the country.
The spread between lending and deposit rates of commercial banks declined marginally to 5.18 per cent in September, following the central bank's dogged persuasion to lower it, at least to 5.0 per cent.
"We expect that the spread would decline further during September-December period this calendar year," a senior official of the Bangladesh Bank (BB) told the FE Sunday.
The weighted average spread between lending and deposit rates in the country's banking sector came down to 5.18 per cent as on September 30, 2008 from 5.34 per cent of June, according to the central bank statistics.
"The central bank will keep continuing its persuasion until the spread come down to 5.0 per cent from the existing level," another BB senior official said.
The weighted average rates on lending stood at 12.35 per cent in September, while the banks paid interests on deposit at 7.17 per cent.
During the period, the weighted average rates on lending stood at 12.35 per cent from 12.29 per cent, while the interest rates on deposit rose to 7.17 per cent from 6.95 per cent, the BB's data showed.
On the other hand, most of the commercial banks, particularly private commercial banks (PCBs) have recently reduced the interest rates on lending in line with the advice of the Bangladesh Association of Banks (BAB).
On March 3, the BAB assured the central bank that its members would reduce interest rates on industrial term loans to 14.75 per cent from the existing 16 per cent, while the same for the productive sectors to 14.50 per cent from existing 15.50 per cent.
"We want the banks to reduce the interest rate spread to 5.0 per cent by improving their efficiency level," the BB official added.
However, Association of Bankers, Bangladesh (ABB) Chairman K Mahmood Sattar told the FE that the existing downward trend in the interest rate spread would continue in the near future also.
"We are hopeful about declining the interest rate spread to 5.0 per cent by the end of this calendar year," he added.
The spread being maintained by at least 17 commercial banks out of 48 are still between over 5.0 per cent and 11.72 per cent, while the average spread of the four government-owned commercial banks, PCBs, foreign commercial banks (FCBs) and specialised banks (SBs) are 4.54 per cent, 4.77 per cent, 9.35 per cent and 2.95 per cent respectively.
The country's business community earlier urged the governor of the central bank for taking initiatives to reduce lending rates to facilitate business activities, particularly to augment industrialisation in the country.