Scheduled banks in October further cut rates of interest on their deposit products due to rising excess liquidity in the banking sector amid lower loan disbursement in the industrial sector, according to the Bangladesh Bank data released last week. The weighted average interest rate on deposit in the banking sector declined to 7.40 percentage points in October from 7.48 percentage points in September of this year.
The weighted average interest rate on deposit was 7.63 percentage points in August, 7.71 percentage points in July, 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 12.49 percentage points in October from 12.58 percentage points in September of this year.
The weighted average interest rate on lending was 12.75 percentage points in August and 12.84 percentage points in July of this year.
Against the backdrop, the interest spread rate, the gap between the interest rates on credit and deposit, slightly declined to 5.09 percentage points in October from 5.10 percentage points in September.
A BB official told New Age on Thursday that the interest spread rate also declined in October, but it was still high as the central bank had earlier asked the banks to maintain the limit below five percentage points.
He said the majority of the banks had recently cut their interest rates for 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, he said.
He said the political uncertainty had put an adverse impact on the private sector credit growth.
The year-on-year credit growth rate in the private sector, however, slightly increased to 12.15 per cent in September compared with that of 11.39 per cent in August of 2014, much lower than the central bank target of 14 per cent by December.
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-set 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 and reserve excluding the statutory liquidity ratio in the banking sector stood around Tk 1,50,000 crore in the first week of September.
The BB data showed that the weighted average rate on deposit in the state-owned commercial banks stood at 7.14 percentage points in October from 7.16 percentage points in September, that in specialised development banks at 8.64 percentage points from 9.18
Continued on B2 Col. 1
-With New Age input
