Business Report :
The weighted average interest rate spread in the local banking sector exceeded 5% in February after 2015, driven by rising lending rates.
According to Bangladesh Bank data, the overall interest rate spread rose to 5.04% in February 2024 compared with 4.66% in December 2023, and significantly up from 2.93% in June 2023.
The spread was highest after February 2015 when it was at 5.04%.
The introduction of a lending rate cap at 9% from April 1, 2020 led to a sharp decline in the interest rate spread at that time.
However, the spread began to increase after the central bank removed the 9% lending rate cap in July the following year.
Currently, some banks are charging close to 13% for loans, while deposit rates have been increasing gradually, albeit slower than lending rates, contributing to the spread reaching 5%.
They said that lending rates typically rose before deposit rates.
Banks assess deposit rates in competitors before raising the rate, they said.
They said that an increased interest rate spread contributed to attaining higher operating profits by banks.
In February, banks offered an average interest rate of 5.01% for deposits and charged an average of 10.05% for loans, resulting in a spread of 5.04%.
In comparison, in February 2023 banks offered an average deposit rate of 4.31% and charged 7.27% for loans, resulting in a spread of 2.96%.
The Bangladesh Bank scrapped the limitation of keeping spread below 4% in November 2023 as lending rate is now connected with Smart.
To ensure sustainable business operations, banks must maintain a certain profit margin.
