Abu Sazzad: Experts have underscored the need for maintaining the banking spread within the prescribed rate of the central bank to revamp the country’s economy from the adverse impact of the virus pandemic.
Still, some 13 banks are maintaining high spread in October last through violating government instruction. The spread of such banks were above the 4 percent ceiling which is a complete violation of the central bank guideline, said the banking sources.
The spread of foreign commercial banks and private commercial banks are higher from the state-owned commercial banks. Out of the foreign commercial banks, Standard Chartered is charging the highest 7.03 percent spread till October. Spread is the difference between interest on deposit and loan.
However, the spread of State Bank of India was 5.12 percent, followed by Citibank NA for 6.59 percent, Commercial Bank of Ceylon for 4.44 percent, Woori Bank for 6.14 percent, The Hong Kong and Shanghai bank for 5 percent and Bank Al-Falah for 4.28 percent.
On the other hand, out of the local private commercial banks, Dutch-Bangla Bank charging the highest 6.32 percent spread, followed by 4.28 percent for The City, 4.02 percent for United Commercial, 5.31 percent for Simanto, 4.92 percent for BRAC and 4.70 percent for Community Bank, according to the latest data of Bangladesh Bank.
A senior Bangladesh Bank official said that banks are failing to reduce their interest spread for rising higher non-performing loans (NPLs) in the recent years.
According to the latest policy of Bangladesh Bank, commercial banks were asked to keep their intermediation spread between the lending and average deposit rates within 4.0 percent.
“Now, we are sincerely working to bring down the spread to 4.0 percent from the existing level shortly but it is hampering for higher operation costs of the banks” he added.
Banks are mostly violating the spread limit in disbursing the productive and SME loan, imposing severe threat to revamp the business and economic activities in the country, he added.
Dr Salehuddin Ahmed, former Governor of Bangladesh Bank expressed his deep concern for higher spread in the virus pandemic period, hindering the economic revamping mechanism. “This time, the higher spread is not acceptable. The central bank should undertake more preventive measures in this connection”, he added.
The central bank is asking banks to maintain the spread rate within the limit, but banks are violating the guideline which is not a good practice for revamping the economy, he lamented.
Bangladesh Bank will have to ensure punishment for the specific banks for violating the central bank guideline to bring back discipline in the banking sector, Salehuddin Ahmed recommended.
Stressing the importance of reducing interest rate, Centre for Policy Dialogue research director Khondakar Golam Moazzem said that there was huge scope for reducing lending rate just by reducing the interest rate spread that had remained high in Bangladesh. In many countries, the interest rate spread is set at 3 per cent and they are doing well with the rate, he said. He has underscored the need for reducing spread for rapid industrialisation in the country.