Abu Sazzad :
Twenty-one banks have been maintaining high spread ignoring Bangladesh Bank’s instruction to bring it within 5 per cent, sources said.
The source said, the banks were maintaining high spread taking advantage of poor regulation by the Bangladesh Bank (BB).
Huge number of classified loans and higher expenditure is the foremost reason for increasing spread (a difference between the lending rate and deposit rate).
According to a latest figure of BB, although the average spread of banking sector stood at 4.79 as on July this year, spread of these banks were above 6 per cent. The central bank instructed banks to keep their spread within 5 per cent with a view to providing low rate loan.
Among the 16 Private Commercial Banks (PCBs) including BRAC Bank maintaining the highest spread of 9.44 per cent, followed by Dutch Bangla Bank 7.51pc, ONE Bank 6.34pc, Uttara Bank 6.07pc, AB Bank 5.47pc, Bank Asia 5.46pc, IFIC Bank 5.28pc, Prime Bank 5.18pc, Jamuna Bank 5.12pc, Pubali Bank 5.07pc, The City Bank 5.06pc, EXIM Bank 5.02pc, Dhaka Bank 5.01pc.
Out of the forth generation banks, Union Bank’s spread is the highest 5.46pc while Midland Bank and Meghna Bank’s spread were 5.24pc and 5.18pc respectively.
On the other hand, Standard Chartered Bank was marinating the highest spread of 9.94pc among the Foreign Commercial Banks (FCBs). The spread of Citi Bank NA was 7.83pc while Woori Bank 7.99pc, Commercial Bank of Ceylon 7.99pc and HSBC 6.89pc.
Bangladesh Bank Executive Director M Mahfuzur Rahman said, the central bank has recently instructed all commercial banks to reduce their spread and lending rates. The central bank also advised them to keep their spread within 5 per cent.
A high official of BRAC Bank, on condition of anonymity, told The New Nation that the bank mainly involves in SME lending in the rural areas, which requires high supervision. Actually, the bank charge high interest rate to absorb risk as most of the SME loans are without collateral. In this backdrop, the spread of the bank is higher, which also put pressure on overall spread, he added.
Meanwhile, a senior official of the central bank said despite lower deposit rate of 5 per cent, the general investors prefer Dutch-Bangla Bank more due to its technological facilities. The bank maintains highest number of ATM booths both in rural and urban areas. As a result, the bank does not need to offer high deposit rate.
Former Vice-President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Md Helal Uddin demanded to reduce the spread so that the business community can avail low rate commercial loan which would facilitate them to operate their business smoothly. Actually, low deposit rate and high lending rate is one of the major obstacles for expanding industrial growth, said Helal.
Economist M Mamunur Rashid said, the existing gap between lending and deposit rate or spread is abnormal comparing with other South Asian countries. According to a World Bank report released recently on global financial development, 2014, the spread of China was 3.1 per cent, Vietnam 2.4 per cent, Malaysia 2.5 per cent, and Thailand 4.8 per cent.
In fact, he said, the financial institutions in Bangladesh have very narrow products and the major income comes from interest on loan and that is why reducing spread is a difficult task but not impossible. He, however, suggested bringing down spread between lending and deposit rates of banks for creating a business friendly environment in the country.
Twenty-one banks have been maintaining high spread ignoring Bangladesh Bank’s instruction to bring it within 5 per cent, sources said.
The source said, the banks were maintaining high spread taking advantage of poor regulation by the Bangladesh Bank (BB).
Huge number of classified loans and higher expenditure is the foremost reason for increasing spread (a difference between the lending rate and deposit rate).
According to a latest figure of BB, although the average spread of banking sector stood at 4.79 as on July this year, spread of these banks were above 6 per cent. The central bank instructed banks to keep their spread within 5 per cent with a view to providing low rate loan.
Among the 16 Private Commercial Banks (PCBs) including BRAC Bank maintaining the highest spread of 9.44 per cent, followed by Dutch Bangla Bank 7.51pc, ONE Bank 6.34pc, Uttara Bank 6.07pc, AB Bank 5.47pc, Bank Asia 5.46pc, IFIC Bank 5.28pc, Prime Bank 5.18pc, Jamuna Bank 5.12pc, Pubali Bank 5.07pc, The City Bank 5.06pc, EXIM Bank 5.02pc, Dhaka Bank 5.01pc.
Out of the forth generation banks, Union Bank’s spread is the highest 5.46pc while Midland Bank and Meghna Bank’s spread were 5.24pc and 5.18pc respectively.
On the other hand, Standard Chartered Bank was marinating the highest spread of 9.94pc among the Foreign Commercial Banks (FCBs). The spread of Citi Bank NA was 7.83pc while Woori Bank 7.99pc, Commercial Bank of Ceylon 7.99pc and HSBC 6.89pc.
Bangladesh Bank Executive Director M Mahfuzur Rahman said, the central bank has recently instructed all commercial banks to reduce their spread and lending rates. The central bank also advised them to keep their spread within 5 per cent.
A high official of BRAC Bank, on condition of anonymity, told The New Nation that the bank mainly involves in SME lending in the rural areas, which requires high supervision. Actually, the bank charge high interest rate to absorb risk as most of the SME loans are without collateral. In this backdrop, the spread of the bank is higher, which also put pressure on overall spread, he added.
Meanwhile, a senior official of the central bank said despite lower deposit rate of 5 per cent, the general investors prefer Dutch-Bangla Bank more due to its technological facilities. The bank maintains highest number of ATM booths both in rural and urban areas. As a result, the bank does not need to offer high deposit rate.
Former Vice-President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Md Helal Uddin demanded to reduce the spread so that the business community can avail low rate commercial loan which would facilitate them to operate their business smoothly. Actually, low deposit rate and high lending rate is one of the major obstacles for expanding industrial growth, said Helal.
Economist M Mamunur Rashid said, the existing gap between lending and deposit rate or spread is abnormal comparing with other South Asian countries. According to a World Bank report released recently on global financial development, 2014, the spread of China was 3.1 per cent, Vietnam 2.4 per cent, Malaysia 2.5 per cent, and Thailand 4.8 per cent.
In fact, he said, the financial institutions in Bangladesh have very narrow products and the major income comes from interest on loan and that is why reducing spread is a difficult task but not impossible. He, however, suggested bringing down spread between lending and deposit rates of banks for creating a business friendly environment in the country.
