Bangladesh's private banks will raise interest rates by up to 3 percentage points for deposits to narrow the gap with lending rates which have also come down, a senior bank official said on Thursday. Private banks last week agreed to cut lending rates by up to 3 percentage points following orders from the central bank, concerned about the competitiveness of Bangladeshi goods.
"The new rates will come into effect from next Sunday," said K. Mahmood Sattar, chairman of the Association of Bankers Bangladesh. The central bank had earlier asked all private banks to narrow the gap between lending and deposit rates, officials said.
"We took the measures after considering demands from the business group," Sattar, also the managing director of City Bank, a leading private bank told Reuters. Commercial banks now offer interest rates of between 13 percent and nearly 4.0 percent on fixed deposits and saving accounts, officials said.
The private commercial banks will charge up to 14 percent for term loans and working capital, down from 16 to 17 percent now. The central bank's official bank rate is at 5 percent. In money market operations, it currently provides funds to banks at 8.50 percent and drains surplus funds at 6.50 percent.
The average lending rate of banks was 12.77 percent in 2007 and 12.60 percent in 2006, while the average deposit rate was 6.85 percent and 6.99 percent, respectively. Despite difficult business conditions as a result of political uncertainty, Bangladesh's commercial banks earned nearly 40 percent more operating profit in 2007 than the previous year, officials said.