Abu Sazzad :
Twenty-six banks have been maintaining high spread ignoring the central banks instruction to bring it within 5 per cent. Actually, the banks are maintaining high spread taking advantage of poor regulation by the Bangladesh Bank, said experts. Spread is the difference between the lending rate and deposit rate of the banks.
Maximum private commercial banks (PCBs) of the country have failed to reduce their spread as the deposit rate is falling faster than the lending rate. Huge number of classified loans and higher expenditure is the foremost reason for increasing spread.
In January, some 19 Private Commercial Banks violated the central bank’s instruction to keep their spread within the set range. Out of the private commercial banks, BRAC Bank maintained the height spread which was 9.86 per cent, followed by 7.63 per cent for Duthch-Bangla Bank Limited, 6.96 per cent for ONE Bank Limited. Among the fourth generation banks, UNION Bank’s spread was 6.47 per cent, according to the latest data of Bangladesh Bank.
Among the six Foreign Commercial Banks, Standard Chartered maintained the highest spread rate which was 9.57 per cent, followed by 7.27 percent for CITI Bank N.A, 7.50 percent for State Bank of India and 6.23 per cent for HSBC.
Meanwhile, the average lending rate declined in January due to the sluggish investment in the country. The average lending rate was 11.05 percent which was 11.18 per cent in December.
Senior Bangladesh Bank Official said The New Nation on Thursday that 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.
The banking experts said that BRAC 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.
Sources said, 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.
First Vice-President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Md. Shafiul Islam 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 the business leader.
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, 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 the last year. 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-six banks have been maintaining high spread ignoring the central banks instruction to bring it within 5 per cent. Actually, the banks are maintaining high spread taking advantage of poor regulation by the Bangladesh Bank, said experts. Spread is the difference between the lending rate and deposit rate of the banks.
Maximum private commercial banks (PCBs) of the country have failed to reduce their spread as the deposit rate is falling faster than the lending rate. Huge number of classified loans and higher expenditure is the foremost reason for increasing spread.
In January, some 19 Private Commercial Banks violated the central bank’s instruction to keep their spread within the set range. Out of the private commercial banks, BRAC Bank maintained the height spread which was 9.86 per cent, followed by 7.63 per cent for Duthch-Bangla Bank Limited, 6.96 per cent for ONE Bank Limited. Among the fourth generation banks, UNION Bank’s spread was 6.47 per cent, according to the latest data of Bangladesh Bank.
Among the six Foreign Commercial Banks, Standard Chartered maintained the highest spread rate which was 9.57 per cent, followed by 7.27 percent for CITI Bank N.A, 7.50 percent for State Bank of India and 6.23 per cent for HSBC.
Meanwhile, the average lending rate declined in January due to the sluggish investment in the country. The average lending rate was 11.05 percent which was 11.18 per cent in December.
Senior Bangladesh Bank Official said The New Nation on Thursday that 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.
The banking experts said that BRAC 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.
Sources said, 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.
First Vice-President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) Md. Shafiul Islam 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 the business leader.
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, 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 the last year. 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.
