Lending rates move closer to single-digit

Banking lending rates have come down closer to single-digit rate following declining deposit rates in August, according to Bangladesh Bank. Average lending rates of all banks stood at 10.24% in August 2016 against 11.51% one year ago while weighted average deposit rates of all banks came down to 5.44% in August 2016 from 6.74% a year ago. The central bank posted the figures on its website yesterday. A turnaround of declining rates does not seem likely because the banks are witnessing healthy deposit growth at existing rates to fulfill credit appetite of the economy, said an analyst. According to a senior banker, banks are slashing lending rates due to pressure from business people. He thinks the rate should be reduced to single digit. Planning Minister AHM Mustafa Kamal recently claimed that the lending rate in Bangladesh is the highest in the world. While addressing an event over e-GP, he was highly critical of bank owners saying that they were charging high interest from businesses for more profits. Private sector credit grew by 16.21% in August 2016 against same month last year and bank deposits grew 13.15% in July 2016 against same month one year ago. Several banks have been on its front foot in the past couple of months fighting over grasping greater market share. Some banks have slashed its interest rate on personal loans from 14-15% to 11-12% while home loans have come down from 11-12% to 8-9%. Banks, however, are not getting the shorter end of the stick as overall banking spread did not see any drastic fall. Banking spread, which is the difference between lending and deposit rates, has come down to 4.80% in August 2016 from 4.84% one month ago.Investors eye banking equitiesBanking stocks have witnessed a substantial increase in trade volume in stock market in recent months, showed data from the UCB Capital Management Ltd. Many banking stock prices have gone up by 15-20% in the recent market rally. Investors in stock market are optimistic about banking equities in recent time eying higher credit growth, said Mohammed Rahmat Pasha, CEO of the UCB Capital Management Ltd. He added: “Banking stocks are also trading at a relatively low prices in comparison to other sectors, which has grasped attraction of investors.”