Most banks cut deposit rates this month

Express (July 24, 2011)

Most commercial banks slashed deposit rates this month while keeping their lending rates almost unchanged, officials said.

"The existing trend about interest rate may facilitate investment, particularly in the productive sectors in the near future," an executive director of the Bangladesh Bank (BB) told the FE Saturday without elaborating.

At least 20 banks -- particularly the private commercial banks (PCBs) - lowered their deposit rates this month aiming to slash their cost of funds while only four commercial banks raised their lending rates.

"Actually, we have been offering the deposit rate at a maximum of 12 per cent from June 20 this year in line with our associations' decisions," a senior private banker told the FE Saturday.

The country's commercial banks now offer deposit rates up to 12.00 per cent, in place of 14.00 per cent in the previous month on fixed deposits. However, the interest rate on other savings accounts ranges between 1.00 per cent and 12 per cent, according to the central bank statistics.

In June last, two professional bodies connected with local banks --- Bangladesh Association of Banks (BAB) and Association of Bankers, Bangladesh (ABB) --- decided to follow a uniform policy on deposit rate.

The two associations have asked the private banks to cap deposit rate at 12 per cent --- a move aimed at curbing a rat race among some banks to collect fresh funds in a bid to ease their liquidity pressure.

The banker also said they have slashed their deposit rates in an effort to cut the cost of funds and keep the lending rate at a stable level.

The lending rates started to rise from March this year after the central bank lifted the cap on it in all but two sectors --- agriculture and industrial term loan.

Currently, the banks provide loans to large and medium-scale industrial plants at lending rates ranging between 12.50 per cent and 13.00 per cent and to small industries, between 10.50 per cent and 18.00 per cent.

Lending rates on housing loans now range between 10.00 per cent and 18.00 per cent and consumer credits, between 13.00 per cent and 22.00 per cent.

"Credit flow to less productive sectors including consumers' items will be further restricted in the near future while the lending rates for priority sectors including food and agriculture will be stable," another private banker said.

The lending rates on working capital to large and medium scale industries vary between 8.75 per cent and 16.50 per cent and for small industries, between 11.50 per cent and 17.30 per cent.