Kazi Zahidul Hasan :
The average bank deposit rates came down to 7.0 per cent in May this year in the wake of falling credit demands from businesses, sources said.
They said, entrepreneurs and big business houses remained shy in taking bank loans due to the prevailing downward trend in private sector investment forcing the banks to cut in deposit rates.
The country’s commercial banks move forward to cut the deposit rates, but no similar cut in lending rates by them is yet to be seen.
As on May this year, the average bank deposit rates came down to 6.99 per cent from that of 7.4 per cent in April, according to an official figure of Bangladesh Bank (BB). The deposit rate was 8.1 per cent in May last year. The BB figure shows that the average lending rates stood at 11.82 per cent in May from that of 11.84 per cent in April. The average rate of bank interest was 13.23 per cent in May last year. The BB figure indicates that the average fall in bank deposit rates was recorded by 0.05 per cent and lending rates by 0.02 per cent during the period under review. “Banks are moving forward to cut deposit rates following crunch in credit demands by local businesses,” a senior executive of a public bank told The New Nation on Sunday.
He added that a lower earning from lending business forced the banks to reduce deposit rates so that they can protect their margins.
“Banks remain cautious in aggressive lending considering the prevailing business climate of the country that also muted the overall credit demands,” he noted.
When asked, he said, the banks may not go for an immediate lending rate cut in the current business environment that has affected the banking sector. The banker however mentioned that a cycle in rate easing in both deposit and lending has already been started in the banking sector and this will be continued in the days to come.
He further said that the banks may not cut their lending rates drastically as because they have been waiting to see how the cost of funds behaves in line with their deposit cut.
The spread between the lending and deposit rates remained above the 5.0 per cent level in May this year despite the fall in deposit rate cut by the banks. As per the instruction of the central bank, the average spread should be within 5.0 per cent.
In April, the average spread was 4.84 per cent and it was 5.22 per cent in April last year. Insiders said that banks have reduced interest rates for their selective customers and also provided loan rescheduling to big borrowers creating an uneven environment to the small and medium enterprises.
Banks are charging high interest rates for the lending to small and medium enterprises ultimately raising their cost of doing business. On the other hand, big borrowers are getting various undue facilities from the banks although they are becoming loan defaulters time and again, they added.
