Interest spread rate in the banking sector hit 17-month high in May as scheduled banks massively cut interest rates on their deposit products due to increasing trend in excess liquidity in the banks. According to the latest Bangladesh Bank data, the interest spread, gap between the interest rates on credit and deposit, stood at 5.22 percentage points in May against 5.14 percentage points in April.
BB officials told New Age on Thursday that the interest spread rate in the banking sector hit 17-month high in May as the banks cut interest rates on deposits due to excess liquidity.
The BB data showed that the interest spread rate in the banking sector was 5.33 percentage points in December, 2012 after which the rate declined gradually in almost every month in 2013.
The interest spread rate, however, maintained an upward trend from the beginning of this year and it hit 5.22 percentage points in May, which is the highest since January, 2013.
The weighted average rate on lending stood at 13.23 percentage points in May which was 13.25 percentage points in April while the interest rates on deposits were paid at 8.01 percentage points in May from 8.11 percentage points in April, the BB data showed.
A BB official said that a number of banks had recently cut their interest rates on deposits as they were now reluctant to collect fund due to a lower credit disbursement amid political uncertainty.
The interest rate on deposit was also lowest in 17 months, the BB data showed.
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 11.39 per cent in May against 11.86 per cent in April.
The BB monetary programme for January-June 2014 set a target of 16.50 credit growth in the private sector.
Against the backdrop, the excess liquidity excluding the statutory liquidity ratio in the banking sector increased to Tk 1,20,675 crore as of March 31, 2014 from Tk 58,988 crore as of March 31, 2013.
The BB data showed that the weighted average rate on lending in the state-owned commercial banks stood at 11.06 percentage points in May which was 11.12 percentage points in April, that at specialised development banks 13.09 percentage points from 13.08 percentage points, that of private commercial banks 13.87 percentage points from 13.87 percentage points and that of foreign commercial banks 12.85 percentage points from 13.01 percentage points.
The weighted average rate on deposit in the state-owned commercial banks stood at 7.53 percentage points in May which was 7.54 percentage points in April, that of specialised development banks 9.54 percentage points from 9.55 percentage points, that of private commercial banks 8.37 percentage points from 8.52 percentage points and that of foreign commercial banks 4.57 percentage points from 4.54 percentage points.
-With New Age input
