Publication Date : 15-06-2013
Rising surplus funds have forced private commercial banks in Bangladesh to cut their lending and deposit rates by 1 percentage point, the first in three years, bankers said.
The banks are now charging 15 per cent for lending instead of 16 per cent a month ago. For deposits, they are offering 11.5-12 per cent, which was 12.5-13 per cent till May.
They had reduced their interest rates last in 2009 to mitigate the impact of the global recession.
“We are sitting on excess funds and that’s why we are discouraging fixed deposits at the moment,” said Anis A Khan, managing director of Mutual Trust Bank.
The private bank’s excess fund has now reached a two-year high due to a slowdown in the investment demand.
Banks’ loanable funds rose by 23,823 crore taka (US$3.06 billion) to nearly 69,500 crore take in the first ten months of the current fiscal year, according to Bangladesh Bank.
The growth of excess liquidity has also brought down the inter-bank call money rate to 7 per cent.
“Interest rates are on the decline and if the amount of non-performing loans falls, the interest rates will come down further,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
Chowdhury said his bank has no pressure for deposits now and accordingly, he has cut the deposit rate by 1 percentage point recently. Pubali is now offering loans at 13.5 per cent for “big but good” clients.
The fall in demand for credit is also evident in the banks’ loan-deposit ratio (LDR) and private sector credit growth.
Most of the banks’ LDR hovers between 70 per cent and 72 per cent, which is significantly lower than the BB’s permissible limit of 85 per cent.
The private sector credit growth went down to a 10-year low to 12.72 per cent in April.
Amid this situation, the BB last month relaxed its provisioning rules to help the banks get around 500 crore taka in fresh investable funds.
SA Farooqui, managing director of Standard Bank, also echoed the same on the interest rate trends. “I hope the lending rate will go down further in a few months.”
Non-bank financial institutions that rely on banks for funds also said they are getting loans from banks at lower rates in recent times.
“Our borrowing cost from banks has reduced by 1 percentage point,” said Asad Khan, managing director of Prime Finance.
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