Spread between lending, deposit rates narrows
Siddique Islam | Friday, 6 March 2009
The weighted average spread between lending and deposit rates narrowed to 5.0 at the end of December 2008 from 5.18 in September last year, officials said.
The weighted average lending rate stood at 12.31 per cent in December down from 12.35 per cent in September, while the interest rate on deposit rose to 7.31 per cent from 7.17 per cent during the same period, according to the central bank statistics.
'We want that the banks reduce their spread through slashing interest rates on lending, particularly for productive sectors that would facilitate the country's business activities,' a senior official of the Bangladesh Bank (BB) told the FE Thursday.
None of the local and foreign banks cut their interest rates on lending in February whereas nine commercial banks increased their interest rates on deposits to lure potential clients.
He also said the banks may also cut the spread with improvement of their efficiency.
'We'll keep continuing our persuasion until the interest rates on lending comes down to a rational level,' another BB official said, adding that the central bank has already sent letters to seven commercials banks asking them to reduce their interest rates on lending in line with the Bangladesh Association of Banks (BAB) commitment.
On March 3, 2008, the BAB proposed to the central bank that they would reduce interest rates on industrial term loans to 14.75 per cent from the existing 16.00 per cent while the interest rates for the productive sectors would be brought down to 14.50 per cent from the existing 15.50 per cent.
'We're very happy to see we've been able to bring down the spread within 5.0 by the end of 2008 as per our commitment to the central bank,' Association of Bankers Bangladesh (ABB) Chairman K Mahmood Sattar told the FE.
He also said the commercial banks are now re-fixing their interest rates on lending in line with the central bank advice.
'Some banks have increased their interest rates on deposits to maintain their credit-deposit ratio properly by mobilising fresh funds from the public,' Mr. Sattar added.
The spread being maintained by at least 11 commercial banks out of 48 still ranges between 5.0 and 11.63, while the average spread of the four government-owned commercial banks (SCBs) is 3.95, private commercial banks (PCBs) 4.70, foreign commercial banks (FCBs) 9.33 and specialised banks (SBs) 3.12.
The country's business community earlier urged the governor of the central bank to take initiatives to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.
The weighted average lending rate stood at 12.31 per cent in December down from 12.35 per cent in September, while the interest rate on deposit rose to 7.31 per cent from 7.17 per cent during the same period, according to the central bank statistics.
'We want that the banks reduce their spread through slashing interest rates on lending, particularly for productive sectors that would facilitate the country's business activities,' a senior official of the Bangladesh Bank (BB) told the FE Thursday.
None of the local and foreign banks cut their interest rates on lending in February whereas nine commercial banks increased their interest rates on deposits to lure potential clients.
He also said the banks may also cut the spread with improvement of their efficiency.
'We'll keep continuing our persuasion until the interest rates on lending comes down to a rational level,' another BB official said, adding that the central bank has already sent letters to seven commercials banks asking them to reduce their interest rates on lending in line with the Bangladesh Association of Banks (BAB) commitment.
On March 3, 2008, the BAB proposed to the central bank that they would reduce interest rates on industrial term loans to 14.75 per cent from the existing 16.00 per cent while the interest rates for the productive sectors would be brought down to 14.50 per cent from the existing 15.50 per cent.
'We're very happy to see we've been able to bring down the spread within 5.0 by the end of 2008 as per our commitment to the central bank,' Association of Bankers Bangladesh (ABB) Chairman K Mahmood Sattar told the FE.
He also said the commercial banks are now re-fixing their interest rates on lending in line with the central bank advice.
'Some banks have increased their interest rates on deposits to maintain their credit-deposit ratio properly by mobilising fresh funds from the public,' Mr. Sattar added.
The spread being maintained by at least 11 commercial banks out of 48 still ranges between 5.0 and 11.63, while the average spread of the four government-owned commercial banks (SCBs) is 3.95, private commercial banks (PCBs) 4.70, foreign commercial banks (FCBs) 9.33 and specialised banks (SBs) 3.12.
The country's business community earlier urged the governor of the central bank to take initiatives to reduce the lending rates to facilitate business activities, particularly to augment industrialisation in the country.