October 2, 2020, 1:14 am


2020-08-11 11:36:57 BdST

Interest rate spread drops slightly to 2.89pc in June

Interest rate spread in the country's banking system fell slightly in June, as banks slashed interest rates on lending more than on deposit.

The weighted average spread between lending and deposit rates, offered by the banks, came down to 2.89 percent in June 2020 from 2.94 percent in the previous month, according to the Bangladesh Bank's (BB) latest statistics.

The weighted average rate on deposit fell to 5.06 percent in June from 5.24 percent a month before, and interest on lending dropped to 7.95 percent from 8.18 percent, the BB data showed.

Senior bankers, however, predicted that the interest rate spread may improve gradually in the near future following adjustment of the interest rates with the market.

Some banks have already slashed their interest rate on deposit, particularly the term ones, because of higher inflow of liquidity in the market, they added.

Currently, most of the banks, particularly the private commercial banks (PCBs), are trying to reduce their cost of funds through slashing the interest rates on deposit, according to the bankers.

Md Abdul Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, said the interest rate spread may gradually increase in the coming months following maturity of the FDRs (fixed deposit receipts) that were collected earlier by offering higher rates.

"The interest rates on lending decreased more than on deposit, as low-cost refinancing funds are available in the banking system," a senior executive of a leading PCB said while explaining the latest trend of interest rates.

Meanwhile, average spread with the state-owned commercial banks (SoCBs) was 2.33 percent in June 2020, the PCBs 2.88 percent, the foreign commercial banks (FCBs) 5.30 percent, and the specialised banks (SBs) 2.10 percent.

In April 2020, the spread came down to 2.92 percent from 4.07 percent in the previous month following implementation of the single-digit interest rate in the banking sector.

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