Banks’ rate cut continues as business remains dull [ Tritiyo Matra News ]

Banks’ rate cut continues as business remains dull

Local November 07, 2015

The scheduled banks cut rates of interest on lending again in September as the businesspeople continued to show reluctance in receiving loans from the banking sector due to sluggish business caused by longstanding political uncertainty, said officials of Bangladesh Bank.
The weighted average interest rate on lending in the banking sector declined to 11.48 percentage points in September from 11.51 percentage points in August of 2015, according to the latest BB data.
The weighted average interest rate on lending continued to decline in the recent months as it was 11.57 percentage points in July, 11.67 percentage points in June, 11.82 percentage points in May, 11.88 percentage points in April, 11.93 percentage points in March, 12.23 percentage points in February and 12.32 percentage points in January.
The lending rate in the banking sector maintained the downward trend consecutively as the banks are compelled to decrease the rate due to a sluggish credit demand from the business people amid the political stalemate, a BB official told New Age on Thursday.
The BB data showed that the weighted average interest rate on deposit of the banks had also decreased to 6.66 percentage points in September from 6.74 percentage points in August of 2015.
The interest spread rate, the gap between the interest rates on credit and deposit, stood at 4.82 percentage points in September. The spread was 4.77 percentage points in previous August.
The BB official said that majority of the banks had recently cut their interest rates both for deposits and lending as they were now facing dull business amid no signs of improved political situation.
The country’s business people have adopted a ‘wait and see’ approach to expand their activities by taking loans from the banks due to the sluggish business trend, he said.
Due to the lower credit demand from the industrial sector, the banks are now facing huge excess liquidity forcing them to rush for the government treasury bills and bond.
The BB data showed that interest rates on all types of T-bills and bonds dropped in recent months as most of the banks submitted bids worth huge amount money at the central bank’s auction for the government tools to invest their idle fund.
The interest rate on T-bill of 91-day stood at 3.49 per cent on November 2, 2015 against 7.36 per cent on November 3, 2014.
The banks submitted bids amounting to Tk 4,342.21 crore in the latest auction for 91-day T-bill, but the government accepted only Tk 500 crore in line with its auction calendar.
The interest rate on T-bill of 182-day stood at 4.20 per cent on November 2, 2015 against 7.70 per cent on November 3 a year ago.
The BB official said that the banks cut their rate of interest on lending over the year to encourage the entrepreneurs but
their (businessmen) feedback was yet to reach a satisfactory level.
Due to the lower credit disbursement, the banks also cut the rate of interest on deposit to discourage the depositors so that they (banks) get a respite from the burden of paying the interest, another BB official said.
For this reason, the central bank cut the target of the private sector credit growth to 15 per cent for the FY16 from 15.50 per cent for the FY15.
The BB data showed that the weighted average rate on lending in the state-owned commercial banks stood at 10.19 percentage points in September, that in specialised development banks at 10.13 percentage point, that in foreign commercial bank at 10.53 percentage points, and that in private commercial banks at 11.95 percentages point.
The weighted average rate on deposit in the state-owned commercial banks stood at 6.62 percentage points in September, that in specialised development banks at 7.88 percentage points, that in private commercial banks at 6.89 percentage points, and that in foreign commercial banks at 2.93 percentage points.