The weighted average spread between deposit and advance rates offered by the commercial banks narrowed slightly in November compared to October last because of the central bank's regular pressure for reducing it below 5.0 per cent, official sources said.
Monthly weighted average rate of interest on lending and deposit came down to 5.41 per cent in November from 5.42 cent in October, according to the statistics of the central bank.
The spread edged down in November from the previous month as an effect of continued pressure from the Bangladesh Bank (BB), businessmen and industrialists.
The lending rate means the interest rate a bank charges on a loan and the deposit rate means the interest rate it offers to a client on a deposit.
The spread in the private and foreign banks was much higher than that in other banks, the BB data showed.
The average lending rate of state-owned commercial banks (SCBs), specialised banks, private commercial banks (PCBs) and foreign commercial banks (FCBs) were 12.08 per cent, 12.44 per cent, 14.64 per cent and 14.40 per cent respectively in November last.
Deposit rates of SCBs, specialised banks, PCBs and FCBs were 7.19 per cent, 9.59 per cent, 9.29 per cent and 5.57 per cent respectively in November.
"It is a good sign that the banks have reduced their spread at last, but the reduced percentage of spread by the banks is not enough," a high BB official told FE Monday.
"If any bank does not bring down the spread to 5.0 per cent within next March, we will curtail some of its opportunities," he added.
However, the central bank never forces any bank to reduce interest rates or increase deposit rates according to the regulation.
All banks are told to comply with the BB directive on cutting the spread to the level below 5.0 per cent in every monthly meeting of bankers with the BB. Generally, chief executives of all banks attend the meeting.
Some 28 banks, out of 47, are not complying with the directive of the central bank on cutting the spread between interest rates. The spread between lending and deposit rates of the banks is more than 5.0 per cent, the latest data available with the BB shows.
Of them, four banks have the spread above 7.0 per cent and three banks between 9.0 and 11.73 per cent, according to data available with the central bank.
A central bank official said an unhealthy competition was going on among the banks in mobilising deposits. So they had been offering higher interest rates on deposits over last couple of months, and as a result the rate of interest on credit was also going up.
He said the central bank should strengthen monitoring so that the banks do not go for any unhealthy competition.
Another official at a private bank said if the rate of interest on deposit could be kept low, the rate of interest on credit would also remain low, resulting in the decline in spread.