Interest rate spread falls 2.94% in Oct

Dhaka (Dec 6, 2020): Interest rate spread in the banking industry declined in October, as the banks cut rates further on lending than deposits, officials said.

The weighted average spread between lending and deposit rates offered by the banks decreased to 2.94 percent in October from 3 percent recorded in the previous month, indicating that the health of the banking sector improved.

The interest rate spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers.

The banks are now implementing the low-cost financial stimulus packages to help businesses weather the Covid-19 fallout, pushing the spread down further, said bankers.

The interest rates on deposits might drop further due to availability of liquidity in the banking system, they forecast.

The weighted average rate on deposits fell to 4.73 percent in October from 4.79 percent in September while rate on lending dropped to 7.67 percent from 7.79 percent, according to the central bank’ latest data.