Twenty-seven banks in December did not maintain the interest rate spread for lending and deposit set by Bangladesh Bank, according to the central bank data released last week.
The BB data, however, showed that the overall interest rate spread, the gap between the interest rate on credit and deposit, and weighted average advance rate decreased slightly from that of the previous November due to a continued pressure from the central banks to the scheduled banks.
The spread and weighted average interest rate in the banking sector in December stood at 5.33 percentage point and 13.80 percentage point from that of 5.41 percentage
point and 13.94 percentage point in November respectively, the BB data showed.
The BB in a meeting with the managing directors and chief executive officers of all banks on January 27 asked the banks to bring down their existing high interest
spread rate below 5 percentage point by next March, otherwise it would take punitive measures against the failure banks.
The BB had earlier arranged a meeting On December 27 with the errant banks for their failure maintaining the spread and advance-deposit ratio set by the central bank
in which the banks’ regulator issued a warning to them.
The latest BB data showed that eight foreign commercial banks out of nine banks which operating their banking activities in the country did not maintain the rules of
the spread rate in December and their weighted average rate was more high than the local banks.
The spread rate in the nine FCBs had stood at 8.76 percentage point and their weighted average advances rate was 14.36 percentage point.
The failure eight FCBs are Standard Chartered Bank, State Bank of India, Habib Bank, Citibank NA, Commercial Bank of Ceylon, National Bank of Pakistan, Woori Bank and
HSBC.
Among the local private commercial banks, 18 banks failed to maintain the spread rate, which are AB Bank, National Bank, The City Bank, IFIC Bank, United Commercial
Bank, Pubali Bank, Uttara Bank, Eastern Bank, Prime Bank, Dhaka Bank, Social Islami Bank, Dutch-Bangla Bank, ONE Bank, EXIM Bank, Bangladesh Commerce Bank, Premier
Bank, Jamuna Bank and BRAC Bank.
The four state-owned banks were able to maintain the spread rate but Agrani bank, and the four specialised banks — Bangladesh Krishi Bank, Rajshahi Krishi Unnayon
Bank, BASIC Bank and Bangladesh Development Bank — maintained the rate successfully in December.
The BB on January 5, 2012 withdrew cap on interest rates on all types of loans, except agriculture and pre-shipment exports, resulting in an upward trend in the rate
of interest on credit and deposit in the banking sector.
The country’s trade bodies including the apex business association FBCCI have been demanding for long that the BB should take proper steps to decrease the spread rate
in the banking sector.
They alleged that their business was facing difficulty due to a high interest rate on bank lending.
A BB official told New Age on Thursday that the high interest rate on lending had put an adverse impact on the investment sector.
The entrepreneurs are now reluctant to set up new industries due to the high interest rate on bank loan, besides the power shortage also hit their entrepreneurship, he
said.
The official, however, hoped that the high spread rate would be brought down in a tolerable condition in the months to come due to the BB’s initiatives.
-With New Age input
