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Download PDF The Bangladesh Bank (BB) yesterday asked all commercial banks to submit proposals within two weeks on how to reduce interest spread between lending and deposit rates and charges for different services.
The central bank observed that the state-owned commercial banks charge reasonably for different services, but the rates charged by local private commercial banks are high while those by foreign commercial banks, too high.
“Banks will submit a proposal within next two weeks outlining how the existing high charges and the gap between lending and deposit interest rates can be narrowed down,” BB Governor Salehuddin Ahmed told reporters after a meeting with representatives of the Bangladesh Association of Banks (BAB), a forum of commercial bank owners.
The central bank will hold another meeting with top officials of the commercial banks tomorrow to discuss the matter.
“We are not imposing anything on the banks respecting the climate of free market economy,” he said adding, “But at the same time we are alert so that none can take any irrational opportunity.”
BAB Chairman Nazrul Islam Majumder, however, defended the current rates saying that running private commercial banks requires higher expenses as they need skilled staff on high pay.
“It will be difficult for us to reduce the lending rates unless the interest on savings certificates and treasury bonds are slashed,” Majumder said, talking to the reporters.
“The governor has assured us that the central bank will set the interest rate spread after discussion with all stakeholders,” he said.
According to a BB report placed in the meeting, the average interest spread of commercial banks in Bangladesh is 6.16 percentage points, whereas the average international spread ranges between 4 and 5 percentage points.
In the government-owned commercial banks the spread is 5.88 percentage points while 6.17 and 8.98 percentage points in private and foreign commercial banks.
The BB list shows that BRAC Bank has the highest spread rate at 13.47 percentage points. Its average interest rate on deposit is 6.51 percent and lending 19.98 percent. BRAC Bank is followed by Standard Chartered Bank with a spread of 11.60 percentage points. Its average interest rate on deposit is 3.31 percent and that on lending 14.91 percent.
The spread of the Islami Bank Bangladesh, an Islami Shariah bank, is 7.29 percentage points as its average interest on deposit is 6.86 percent and on lending 14.15 percent.
Pointing to the high charges by private and foreign commercial banks, the BB report observed a government-owned bank does not charge clients for account closure while private commercial banks charge from Tk 300 to Tk 500 and the foreign commercial banks from Tk 300 to Tk 1000.
The commercial banks also take negotiation commissions in case of opening the letter of credits for export purposes, it noted.
The BB proposed that the banks withdraw all charges relating to accounts operation and stop taking handling costs from the clients.
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