Mohammed Badrul Ahsan :
The average lending rate in the banking sector has drastically slowed in November against the backdrop of the businesses’ persistent reluctance to borrow from banks amid a dull business situation in the country.
According to Bangladesh Bank (BB) data, the rate of interest on lending during the period comes down below 10 percent which is lowest rate against lending of the country’s history.
BB began logging the weighted average interest rates on lending and deposit in 1975 and the interest rate was never seen declining below 10 per cent since then, said a BB official, while talking to The New Nation.
The BB data showed that the weighted average rate on lending stood at 11.27 per cent in 2015, 12.46 per cent in 2014, 13.42 per cent in 2013, 13.77 per cent in 2012, 12.80 in 2011, 11.34 in 2010, 11.51 in 2009, 12.40 in 2008 and 12.78 in 2007.
Scheduled banks also cut their rates of interest on lending in November, the 23th month in a row, as the rate declined to 9.94 per cent in November from 10.03 per cent in October.
Meghna Bank managing director Nurul Amin told The New Nation that the banking sector was forced to lower the lending rates due to a sluggish credit demand from the businesspeople.
He said that the majority of the banks had recently cut their rates of interest both on deposits and lending in the face of dull business.
Due to the lower credit demand from the businesspeople, banks are now having huge excess liquidity resulting that the banks also cut their interest rates on deposit products, Amin said.
The depositors are also suffering due to the lower rates on the banks’ products, he observed.
The interest rate on the lending might decline further in the months to come if the existing sluggish business does not improve, Amin, also a former president of Association of Bankers, Bangladesh, said.
The BB official said that as the banks had huge amount of deposits, they were now racing to lure customers by cutting the interest rates for all types of loans.
The country’s banking sector now facing excess liquidity of more than Tk 1 lakh crore, he said.
Many of the banks are now charging home loan at around 8 per cent while personal loan rate also came down to as low as 10 per cent which were earlier at around 18 per cent and 20 per cent respectively in two to three years back, the official said.
The BB data showed that the private sector credit growth in the country decreased in November for the third month in a row.
The private sector credit growth decreased to 15.01 per cent in November year-on-year compared with that of 15.20 per cent in October.
The private sector credit growth declined to 15.34 per cent in September year-on-year compared with that of 16.21 per cent in August this year.
Against the backdrop, rates of interest on all types of T-bills and bonds also dropped in recent months, as most of the banks submitted excessive bids at the auctions for the instruments to invest their idle funds.
The BB official said that banks had trimmed rates of interest on lending throughout the immediate past year to encourage entrepreneurs to take loans, but their (entrepreneurs) responses were yet to reach at a satisfactory level.
The BB is frequently asking banks to disburse more credit to the SME and agriculture sectors to stimulate the private sector credit growth.
The BB data showed in November the weighted average interest rate on lending stood at 9.13 per cent at the state-owned commercial banks, 8.91 per cent at the specialised development banks, 8.36 per cent at the foreign commercial banks, and 10.27 per cent at the private commercial banks.
The weighted average interest rate on deposit in November stood at 5.23 per cent at the state-owned commercial banks, 6.50 per cent at the specialised development banks, 5.50 per cent at the private commercial banks, and 1.78 per cent at the foreign commercial banks.
