The is due to the banks reluctance to collect funds at high interest rate amid sluggish investment climate, bankers said 

Interest rates on bank deposits have gone down to as low as 7% in June this year, breaking a steady trend of over 8% in the last 27 months.

The is due to the banks reluctance to collect funds at high interest rate amid sluggish investment climate, bankers said. 

The deposit rate stood 7.79% in June from 8.01% in the previous months. It ranged between 8.68% and 8.01% for more than last two years. Earlier, the rate came below 8% in February 2012 and stood at 7.95%. The deposit growth dropped to 15.89% in June from 16.26% in December last year, as a result.

Banks have reduced the interest rate on deposit as they are unable to invest the money due to lack of credit demand, said a senior executive of a private bank.

“We have also reduced the lending rate to encourage entrepreneurs for becoming more active in their business expansion as the economy started returning to normalcy after a prolonged political unrest,'' Pubali Bank Managing Director Helal Ahmed Chowdhury told the Dhaka Tribune.

He said all the scheduled banks would cut their lending rates gradually as they are under pressure to reduce it because of the robust foreign loan inflow.

The interest rate on advance loans reduced to 13.1% in June from 13.23% in the previous month.

The total deposits of the banking sector increased by 5.15% to Tk610,530 crore in October-December period of 2013 as compared to 50.62% growth to Tk532,633 crore in the same period of previous year, according to latest Bangladesh Bank figures.

The banks failed to utilise the deposits due to lack of investment opportunities before the general election on January 5, said a senior executive of another private bank.

As a result, he said, the banks were reluctant to collect deposits and reduced the deposit rates to discourage depositors.

Consequently, the depositors are now searching for new opportunities to get lucrative return from their idle money, he said.

“The depositors have turned their eyes on the share market as the retail investors to some extent got back their confidence after the demutualisation of the stock exchanges,'' he said.

The interest rate spread went up abnormally in the recent months due to deeper cut in deposit rate than the lending rate. 

As a result, despite warning of the central bank to keep the interest rate spread at the desired level of 5%, the spread between the lending and deposit rates further rose to 5.31% in June, which is highest in 17 months. It was 5.22% in May. At the bankers meeting held last month, the central bank warned the banks of bringing down the spread at a desired level.

The spread was 5.33% in December 2012 when the lending rate was 13.8% and deposit rate 8.47%. The spread ranges between 4.95% and 5.15% in last one and half years.

The central bank though tried to keep the spread at 5%, it went up from February after coming down at 4.99% in January.

The gap rose again as banks were forced to cut their deposit rate due to low investment demand and easing money market conditions. They slashed the lending rate slightly as compared to the deposit rate cut that caused an imbalance between the rates and pushed the spread up, said a senior executive of Bangladesh Bank. 

The refinance scheme will be implemented through the country’s banks and financial institutions

 A business review meeting of Dhaka Bank Limited was held at The Peninsula Chittagong in the port city on Saturday.

Abdul Hai Sarker, Chairman of the bank attended the meeting, said a press release.

 The Half-Yearly Branch Managers’ Conference of Union Bank Ltd was held at Hotel Lake Shore in Dhaka on Saturday.

Md. Abdul Hamid Miah, Managing Director of the bank attended the conference as chief guest, said a press release.

Syed Abdullah Mohammed Saleh, DMD, S.A.M Salimullah, Senior Executive Vice President, A.B.M Mokammel Haque Chowdhury, Executive Vice President, Abdul Hannan Khan, Company Secretary, branch managers and high officials of the bank were present.

KS Tabrez, Managing Director of Dutch-Bangla Bank Limited, inaugurates the 137th branch of the bank at Kapasia in Gazipur on Sunday.

 Dutch-Bangla Bank Limited (DBBL) opened its 137th branch at Kapasia in Gazipur on Sunday.

KS Tabrez, Managing Director of the bank inaugurated the branch, said a press release.

The bank has provided a wide range of banking products and financial services including card services to its retail and corporate customers.

The new branch will provide on-line banking facilities to the clients.

The total number of the ATMs and Fast Track networks of the bank has stood at 2,560 and 295 respectively across the country, it was told.

DBBL has introduced Mobile Banking Services in 2011 for the first time in Bangladesh to bring huge number of un-banked population of the country particularly in rural or remote areas into banking channel. KS Tabrez said, “DBBL is a market leader in retail customer based deposit accounts which stands at 3.5 million now.”

He called upon local people and business community to avail the best services and on-line banking facilities by maintaining a bank account with DBBL, he added.