Monday, 25 March, 2019

Banks’ deposit rates on the rise amid liquidity crisis

Published on: 11:16 am - Saturday | March 17, 2018


Rate of interest on deposits in a number of banks increased up to 12.05 per cent in March this year amid liquidity crisis in the sector, raising concern among businesses about increased cost of doing business.
Businesses have said that such trend of deposit rate would ultimately lead to an increased lending rate by the banks.
On the other hand, rise in lending rate will hamper investment plan and many may rethink making investments in the context of high lending rate, they fear.
South Bangla Agriculture and Commerce Bank Limited increased triple benefit scheme’s interest rate to 12.05 per cent and the rate was effective since February 11.
The new generation bank was also offering 12 per cent interest under its double benefit scheme.
Besides, Farmers Bank Limited was offering 12 per cent interest to its customers against a monthly saving scheme for three-ten years, while the entity was also offering 11.25 per cent interest against monthly saving scheme for above three years.
NRB Global Bank, another new generation bank, was also offering 11 per cent under its double pension scheme.
In February this year, AB Bank has increased interest rate for the monthly saving scheme from 7.75 per cent to 9.50 per cent.
As per the Bangladesh Bank data of January this year, weighted average interest rate on bank deposit was 5.01, while the rate was 5.44 per cent in private commercial banks.
In June last year, the weighted average interest on deposits in private banks was 5.14 per cent.
The increasing demand for money was also observed in the call money market following Bangladesh Bank’s instruction to maintain higher advance-deposit ration.
BB increased ADR ration to 83.5 per cent from 85 per cent with a view to containing indiscriminate loan disbursement by the banks thus raising concern of higher amount of classified loan.
Weighted average rate of interest on deposit was 8.68 per cent and that had declined to 4.90 per cent in November last year.
Bangladesh Garment Manufacturers and Exporters Association president Siddiqur Rahman told New Age, ‘We don’t understand the drastic change in liquidity situation where huge amount of fund was idle in the banking system a year ago.’
The president of the country’s largest export earners’ association said that such growing rate of interest on deposit would ultimately push lending rate to double digit, which was single digit for a couple of years.
He said that the country’s business and investments, which got some momentum in the recent time, would be hampered if the lending rate would jump to double digit.
In the context of high lending in Bangladesh considering the rate in other countries, Bangladesh’s businesses would struggle further to maintain their competitiveness if the lending rate increased further, he said.
Meanwhile, Dhaka Chamber of Commerce and Industry at a recent meeting with Bangladesh Bank top officials urged the central bank to contain the interest rate for the betterment of the country’s economy as well as businesses.

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