Overall interest-rate spread in the country's banking sector yet widened slightly as commercial banks slashed interests on deposits more than on lending, despite pleas for bridging the gap.
The weighted average spread between lending and deposit rates offered by the commercial banks rose to 4.87 per cent in April 2016 from 4.86 per cent in the previous month, according to the central bank's latest statistics, released Wednesday.
The spread was 4.81 per cent in February 2016.
On the other hand, the weighted average rates on deposits came down to 5.77 per cent in April from 5.92 per cent in the previous month while interest rates on loans dropped to 10.64 per cent from 10.78 per cent.
Senior bankers, however, foresee that the interest-rate spread may decrease further in the coming months as some banks offer lower interest rates on lending to their clients, particularly corporate ones who now look beyond borders for funds.
"We're offering interest rates on short-term lending at 7.0 per cent to our corporate clients," a senior official of a leading private commercial bank (PCB) told the FE.
He also said his bank had already provided a short-term loan to a leading mobile operator at a knocked-down rate of only 5.0 per cent.
"We're now offering such low-cost loans only to the corporate clients for using our excess liquidity," the private banker explained.
The overall excess liquidity with the commercial banks stood at around Tk 1.05 trillion as of April 7 last but major portion of the funds has been invested in the risk-free government securities, according to a senior official of the Bangladesh Bank (BB).
He also said excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 36 billion.
"The amount of excess liquidity fell slightly during the period under review as the overall bank credits increased," the central banker explained.
The overall excess liquidity with the commercial banks was around Tk 1.23 trillion a month ago, he added.
Talking to the FE, Managing Director and Chief Executive Officer (CEO) of the National Credit and Commerce (NCC) Bank Limited Golam Hafiz Ahmed said the existing trend in lending rate is good for businesses but it will create pressures on profitability of the banks in the short run.
The spread being maintained by at least 23 commercial banks out of 56 still ranges as high as between more than 5.0 per cent and 9.56 per cent.
Average spread with the six state-owned commercial banks (SoCBs) is 4.03 per cent, private commercial banks (PCBs) 5.03 per cent, foreign commercial banks (FCBs) 7.21 per cent and specialised banks (SBs) 1.95 per cent.
"We're still working to bring the spread down to nearly 4.0 per cent shortly from the existing level," another BB official said.
The central bank advices the banks to cut down the interest-rate spread through reducing their volume of classified loans, the central banker explained.
"The banks may offer lower interest rates on lending if they are able to reduce their volume of non-performing loans (NPLs)," he mentioned.
The central banker also said the BB wants that the banks reduce the spread with improvement in their efficiency instead of only cutting down the interest rates on deposits.
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