Spread between lending, deposit rates rises
Thursday, 13 December 2007
Siddique Islam
The spread between lending and deposit rates increased slightly last September, despite persuasion to the commercial banks by the central bank to come down the rate at a reasonable level.
"We will continue our persuasion to the banks to bring down the spread at a tolerable level," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
He also said the central bank is closely monitoring the situation using different tools, if necessary, to protect depositors' interest.
The BB is persuading the banks to reduce the spread through improvement of efficiencies, but not by raising lending rates, the official added.
Last September, the central bank decided to take a hard-line against the commercial banks that are maintaining over 5.0 per cent spread between lending and deposit rates.
Under the moves, the BB imposes restrictions on some major expansionary activities including issuance of licence for authorised dealer (AD) branch, generally known as foreign exchange branch, and approval for opening of new branches.
The BB took the moves against the backdrop of a rising trend of spread last June that may affect competitiveness of local entrepreneurs in the global market.
Last July, the central bank asked 27 commercial banks, which have spread of over 5.0 per cent between lending and deposit rates, to explain their positions.
The weighted average spread between lending and deposit rates in the country's banking sector stood at 6.16 per cent as on September 30, 2007 against 5.93 per cent of June 30 last, according to the central bank statistics.
Besides, the weighted average rates on lending stood at 12.92 per cent last September while the interest rates on deposit were paid at 6.76 per cent by the banks, the data showed.
The spread, being maintained by at least 16 commercial banks out of 48, are still between over 6.0 and 13 per cent, while the average spread of the government-owned four commercial banks, private commercial banks (PCBs), foreign commercial banks (FCBs) and specialised banks (SBs) is 5.88 per cent, 6.17 per cent, 8.91 per cent and 2.98 per cent respectively.
The spread between lending and deposit rates increased slightly last September, despite persuasion to the commercial banks by the central bank to come down the rate at a reasonable level.
"We will continue our persuasion to the banks to bring down the spread at a tolerable level," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
He also said the central bank is closely monitoring the situation using different tools, if necessary, to protect depositors' interest.
The BB is persuading the banks to reduce the spread through improvement of efficiencies, but not by raising lending rates, the official added.
Last September, the central bank decided to take a hard-line against the commercial banks that are maintaining over 5.0 per cent spread between lending and deposit rates.
Under the moves, the BB imposes restrictions on some major expansionary activities including issuance of licence for authorised dealer (AD) branch, generally known as foreign exchange branch, and approval for opening of new branches.
The BB took the moves against the backdrop of a rising trend of spread last June that may affect competitiveness of local entrepreneurs in the global market.
Last July, the central bank asked 27 commercial banks, which have spread of over 5.0 per cent between lending and deposit rates, to explain their positions.
The weighted average spread between lending and deposit rates in the country's banking sector stood at 6.16 per cent as on September 30, 2007 against 5.93 per cent of June 30 last, according to the central bank statistics.
Besides, the weighted average rates on lending stood at 12.92 per cent last September while the interest rates on deposit were paid at 6.76 per cent by the banks, the data showed.
The spread, being maintained by at least 16 commercial banks out of 48, are still between over 6.0 and 13 per cent, while the average spread of the government-owned four commercial banks, private commercial banks (PCBs), foreign commercial banks (FCBs) and specialised banks (SBs) is 5.88 per cent, 6.17 per cent, 8.91 per cent and 2.98 per cent respectively.