Banks’ interest rate spread improves

The surge in credit demand during the apparently post-pandemic period is helping banks turn around as their interest rate spread improves – an indicator to hunt profit.

The overall interest rate spread of banks stood at 3.10 percentage points in March this year, up from 3.08 percentage points in the previous month, as per the latest data from the Bangladesh Bank. Most banks raised their lending rate in recent time due mainly to increasing trend of credit demand in the post-pandemic period.

The private sector credit growth reached 11.29 per cent in March which was a 34-month high because of import financing and increased economic activities, the BB data shows.

Mutual Trust Bank Managing Director and CEO Syed Mahbubur Rahman said the interest rate on lending now reached 9 per cent which was between 7.50 per cent and 8 per cent in a few months back.

The lending rate has risen due to the swelling credit demand recently. The average lending rate of banks stood at 7.11 per cent in March, up from 7.10 per cent a month ago.

On the other hand, the average deposit rate of banks stood at 4.01 per cent in March, down from 4.02 per cent in the previous month.

In March, the average lending rate of Agrani Bank stood at 7.47 per cent, up from 7.44 per cent a month ago, and that of IFIC bank at 8.42 per cent from 8.37 per cent.

Such rate for Standard Chartered Bank stood at 7.38 per cent in March rising from 7.10 per cent a month ago.

Dhaka Bank Managing Director and Chief Executive Officer Emranul Huq said the private sector credit demand keeps rising as industrial operation has resumed after the second wave of the pandemic.

The growing trend of import financing was one of the reasons behind the credit growth, the banker said, adding that the country’s import payments rose sharply after the second wave.

During July-March of the current fiscal year, the Letter of Credit (LC) settlement, which was actual import, stood at $ 60.57 billion, up by 49.64 per cent year on year, as per the BB data.

In March, the interest rate spread of state-run banks stood at 2.50 per cent while that for private commercial banks 3.11 per cent and foreign banks 5.42 per cent.