The weighted average spread between commercial banks' lending and deposit interest rates hit significantly high in recent months as banks massively cut interest rates on their deposit products due to increasing trend in excess liquidity in the banks.
According to the latest economic review of Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI), the weighted average spread between commercial banks' lending and deposit interest rates hit 17-month high in May 2014 as banks massively cut interest rates on their deposit products due to increasing trend in excess liquidity in the banks.
According to the latest BB data, the interest spread stood at 5.22 percent in May against 5.14 percent in April 2014. In December 2012, the spread was 5.33 percent after which the rate declined gradually in almost every month in 2013, however, it maintained an upward trend from the beginning of 2014 and hit 5.22 percent in May 2014. The average lending rate and deposit rate in May 2014 was 13.23 percent and 8.01 percent, respectively. These rates were, respectively, 13.25 percent and 8.11 percent in April 2014.
Taka appreciated marginally (by 0.17%) in terms of US dollar at the end of June 2014, showing stability in the foreign exchange market. On the inter-bank market, the US dollar was quoted at Tk.77.6300 at the end of June 2014. The Taka-dollar exchange rate was Tk.77.7593 at the end of June 2013.
Bangladesh Bank (BB) employs repo, reverse repo, and BB bill rates as policy instruments for influencing financial and real sector prices. Effective from 1 February 2013, the repo and reverse repo rates have remained unchanged at 7.25 percent and 5.25 percent, respectively.
Quoting BB data, the MCCI said broad money (M2) recorded a lower growth of 15.3 percent y-o-y at the end of May 2014, compared to the growth of 18.1 percent till May 2013. Domestic credit recorded a lower growth of 10.1 percent (y-o-y) at the end of May 2014, compared to 12.3 percent growth at the end of May 2013.
Total liquid assets of the scheduled banks stood higher at Tk.210,596 crore as of end May 2014 compared to Tk.174,170 crore as of end June 2013. Since, however, the required liquidity (SLR) of the scheduled banks stood lower at Tk.70,354 crore, the excess liquidity of scheduled banks as of end May 2014 stood higher at Tk.140,242 crore, compared to Tk.79,439 crore as of end June 2013
Bangladesh Bank data shows that, of the total liquid assets of scheduled banks as of end May 2014, some 4.01 percent is held in the form of Cash in vault and Balances with Sonali Bank, 21.56 percent in the form of Balances with Bangladesh Bank, and the remainder 74.43 percent in the form of unencumbered approved securities.
