Bangladesh Bank instructs banks to bring down spread to 4%

Bangladesh Bank has instructed all banks to bring down ‘spread’ that is the difference between interests on loans and deposits to 4 percent by decreasing the lending rate.

Earlier in 2015, it instructed banks to limit the spread within 5 percent in all sectors except for credit card and consumer loan.

The central bank issued a notice on Wednesday as the banks are unreasonably increasing interest rates for different types of loans which is alarming.

“In this context, you are instructed to fix a reasonable interest rate for loans by limiting the ‘spread’ within 4 percent in different sectors including production sector, apart from credit card and consumer loan sector.”

Most of the banks have loan interest rate higher than the normal range.

Prime Minister Sheikh Hasina told the private bank owners to decrease the interest rate for bank loans in a meeting in April.

However, most of the banks are not following the directive of Bangladesh Bank to decrease the loan interest rate and fix the spread.

According to Bangladesh Bank, Madhumati Bank keeps the highest spread among all commercial banks. It collects deposit with 7.06 percent interest rate while distributes with 12.91 percent, making the spread rate as 5.82 percent.

The Farmers Bank collects deposits at 8.53 percent interest rate while disburses loans at 13.26 percent; the spread is 4.73 percent.