Interest spread rate in the banking sector increased further in March as 24 scheduled banks failed to maintain the rate below five percentage point in accordance with the central bank’s directions.
According to the latest Bangladesh Bank data, the overall interest spread, the gap between the interest rate on credit and deposit, stood at 5.15 percentage point in March against 5.06 percentage point in February. The interest spread rate in January was 4.99 percentage point.
A BB official told New Age on Thursday that the interest spread rate in the banking sector increased consecutively in the last three months as credit demand from the private sector increased in the period.
The BB data showed that the year-on-year credit growth rate in the private sector stood at 11.46 per cent in March whereas it was 10.73 per cent in February.
He said the central bank had asked the managing directors of the scheduled banks in a bankers’ meeting, held on February 18, to maintain their interest spread rate below five percentage point.
But, the banks ignored the central bank directives and set higher interest rate on their lending, they said.
The officials said that the interest spread rate in the banks had declined to five percentage point in the majority months of 2013 as the businesspeople received lower credit than the normal situation amid political unrest over the process of holding the general elections.
The interest spread in the banking sector may increase more in the coming months if the central bank does not take initiative in this connection, the BB official said.
‘Besides, a number of banks in the last year faced a lower operating profit than the previous year due to the sluggish business amid political unrest. The banks will try to act an aggressive banking to earn a quick profit by increasing the interest rate on lending’, he said.
Against the backdrop, the banking sector will plunge in a hazardous situation if the central bank fails to curb the rate of interest of the banks, he said.
The weighted average rate on lending stood at 13.36 percentage point in March which was 13.40 percentage point in February while the interest rates on deposits were paid at 8.21 percentage point from 8.34 percentage point in February, the BB data showed.
The 24 banks that failed to maintain the rate in accordance with the central bank’s directions are: AB Bank, Bangladesh Commerce Bank, Bank Asia, BASIC Bank, BRAC Bank, Citibank NA, Commercial Bank of Ceylon, Dhaka Bank, Dutch-Bangla Bank, Eastern Bank, Habib Bank, HSBC, IFIC Bank, Jamuna Bank, National Bank, ONE Bank, Premier Bank, Prime Bank, Pubali Bank, Standard Chartered Bank, Social Islami Bank, The City Bank, Uttara Bank and Woori Bank.
The interest spread rate in the state-owned commercial banks stood at 3.64 percentage point in March, that of state-owned specialised development banks at 3.46 percentage point, that of private commercial banks at 5.31 percentage point and that of foreign commercial banks at 8.78 percentage point.