Scheduled banks continued to cut the rate of interest on their deposit products due to an increasing trend in excess liquidity in the banking sector, according to the latest Bangladesh Bank data. The BB data showed that the banks had cut consecutively the interest rate on their deposit products in recent months including August. The weighted average interest rate on deposit in the banking sector declined to 7.63 percentage points in August from 7.71 percentage points in July.
The weighted average interest rate on deposit was 7.79 percentage points in June, 8.01 percentage points in May, 8.11 percentage points in April, 8.21 percentage points in March, 8.34 percentage points in February, 8.40 percentage points in January of this year.
The BB data, however, showed that the weighted average interest rate on lending also declined to 12.75 percentage points in August from 12.84 percentage points in July.
The weighted average interest rate on lending was 13.10 percentage points in June.
Against the backdrop, the interest spread rate, the gap between the interest rates on credit and deposit, slightly declined to 5.12 percentage points in August from 5.13 percentage points in July.
A BB official told New Age on Thursday that the interest spread rate had declined in August, but it was still high as the central bank had earlier asked the banks to maintain the limit below five percentage points.
The central bank has recently asked the banks at a bankers’ meeting to cut their rate of interest on their industrial credit for the interest of entrepreneurs.
The BB official said the majority of the banks had recently cut their interest rate on deposits as they were now reluctant to collect funds due to a lower credit disbursement amid political uncertainty.
The business community has adopted a ‘wait and see’ approach to expansion of their business by taking loans from the banks due to political uncertainty.
The political uncertainty has put an adverse impact on the private sector credit growth.
The year-on-year credit growth rate in the private sector stood at 11.25 per cent in July 2014 compared with that of 11.43 per cent in the corresponding month a year ago.
The BB data showed that the year-on-year credit growth rate in the private sector stood at 12.27 per cent in the FY14 against the central bank target of 16.50 per cent.
For this reason, the BB set a lower private sector credit growth of 14 per cent in its monetary programme for July-December 2014.
The BB official said that the excess liquidity excluding the statutory liquidity ratio in the banking sector had recently crossed Tk 1,20,000-crore mark.
The BB data showed that the weighted average rate on deposit in the state-owned commercial banks stood at 7.20 percentage points in August from 7.23 percentage points in July, that in specialised development banks at 9.27 percentage points from 9.31 percentage points, that in private commercial banks at 7.94 percentage point from 8.04 percentage points, and that in foreign commercial banks at 4.09 percentage points from 4.34 percentage points.
The weighted average rate on lending in the state-owned commercial banks stood at 10.72 percentage points in August from 10.75 percentage points in July, that in specialised development banks at 12.23 percentage points from 12.29 percentage points, that in private commercial banks at 13.37 percentage points from 13.48 percentage points, and that in foreign commercial banks at 12.14 percentage points from 12.32 percentage points.
-With New Age input
