Brac Bank charging highest on lending

Banks defying BB's directive on spread

03 March 2014 Kazi Zahidul Hasan

Twenty four commercial banks, both local and foreign, were maintaining a higher spread between the deposit and lending in defiance of the central bank's instruction in this regard, official sources said on Sunday.They said, the average interest spread of these banks ranged from six to near about ten per cent in some cases at the end of January 2014. The rising spread was adversely affecting the overall financial market, pushing up cost of borrowing, As per the Bangladesh Bank (BB) directive, the country's commercial banks are supposed to maintain a gap of five per cent between the deposit and lending.The banks which maintained a higher interest spread include: Rupali Bank, Basic Bank, AB Bank, City Bank, IFIC Bank, Pubali Bank, Uttara Bank, Eastern Bank, Prime Bank, Southeast Bank, Social Islami Bank, Dutch-Bangla Bank, One Bank, Bangladesh Commerce Bank, Premier Bank, Bank Asia, Jamuna Bank, Standard Chartered Bank, Habib Bank, City Bank NA, Commercial Bank of Cylon, Woori Bank and HSBC.Brac Bank, owned by micro-credit lender Sir Fozle Hasan Abed, remained on top the list with 9.81 per cent interest spread. It was charging an average 16.63 per cent interest while providing loans to the entrepreneurs taking the highest place among all the banks.Basic Bank, a state-owned specialized bank, was charging the second highest interest rate with an average lending rate of 16.43 per cent."Both the lending and deposit rates of these banks increased notably during the last couple of months due mainly to unhealthy competition amongst the banks," a senior BB official told The New Nation yesterday, on condition of anonymity."We have asked commercial banks to take effective measures so that they can be able to maintain the spread in compliance with the central bank directive," he said. He further said, BB was monitoring the matter so that the spread can remain a rational level to help boost business across the country.The BB official noted that the widening spread is causing some adverse impact on the financial market and creating pressure on the price situation.Despite higher spread maintain by the above mentioned banks, overall spread between the deposit and lending in the banking industry, however, hovered at 4.99 per cent in January this year down from 5.60 per cent in December last.The commercial banks have collected deposit at an average interest rate of 8.40 per cent in January this year while they charged 13.39 per cent interest on an average on commercial loans. That means the gap between deposit collection and lending remained at 4.99 per cent.    The state-owned commercial banks--Sonali, Rupali, Janata and Agrani-charged an average interest of 11.15 on lending while their average deposit collection rate was 7.72 per cent, showing the average spread at 3.44 per cent during the month under review while it was 3.47 per cent in December, 2013.Average lending rate of the specialized commercial banks was 13.02 per cent during January this year while they provided 9.73 per cent to the depositors. Besides, the spread of private commercial banks stood 5.17 per cent in January this against 5.27 per cent in December last.  Interest spread of the foreign commercial banks, however, came down slightly to 8.59 per cent in January this year from 8.71 per cent hovered in December last.

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