Bangladesh Bank instructs banks to cut interest on loans

Commercial banks have not brought down lending rates, despite a cut in interests on deposits, says the Bangladesh Bank.

“Bangladesh Bank thinks it’s necessary to cut interest rates on loans to create an investment-friendly atmosphere in the country,” reads the minutes of a bankers’ meeting held on Apr 30 at the Bangladesh Bank.

It also says that Governor Atiur Rahman instructed banks to lower interest rates on lending.

Average interest rate on loans stood at 12.32 percent in January, but in case of at least 14 banks, the average was above 14 percent, according to the Bangladesh Bank.

The 14 banks are BASIC Bank, National Bank, Exim Bank, Premier Bank, BRAC Bank and the eight new banks— Farmers Bank, Modhumoti Bank, Meghna Bank, Union Bank, NRB Global Bank, NRB Commercial Bank and Midland Bank.

“Initiatives have been taken to lower the interest rate on loans. The managing directors of banks have been also instructed in the bankers’ meeting,” Deputy Governor SK Sur Chowdhury told bdnews24.com.

In January, the net interest spread of Bangladesh’s banking sector stood at 5.06 percent.

Spread refers to the difference in borrowing and lending rates of financial institutions.

The average interest rate on loans was at 12.32 percent while for deposits it was 7.26 percent in January.

In February, deposit rates fetched 7.19 percent interest and loans attracted 12.23 percent.

According to Bangladesh Bank’s latest loan disbursements figures of March, banks are charging large and medium enterprises more than 15 percent interest for term loans.