Bangladesh Bank yesterday expected the average lending rate would fall further in the coming days thanks to the reduction in interest rates on all types of National Savings Certificates by around 2%.
“Bangladesh Bank has been actively working towards reducing the lending rate to a rational level so as to ensure an investment-friendly economic environment,” it said in a statement. “At present, banks have sufficient liquidity to expand loans to the potential borrowers.”
The lending rates have witnessed a substantial fall in the recent months, registering 11.93% in March compared to 13.36% in the same period last year.
The interest rate on lending is going down due to rationalisation of various service charges, fees, commission charges etc, avoiding high expenditure to establish bank branches, and adoption of policies towards limiting expenditure for the purchase of transport vehicles, said the statement.
The central bank, however, pointed out the lending rates declined not at the same pace the deposit rates. The deposit rate dropped to 7.06% in March from 8.21% in the same month last year.
Though the banks cut the interest rate on deposits rapidly on excuse of reducing lending rate, the central bank did not intervene into it to protect the depositors’ interest, said a senior banker.
On the other hand, he said, the government has also announced interest rate cut on savings instruments while the depositors are turning their investment towards the savings certificates.
Bangladesh Bank is trying to protect the entrepreneurs’ interest by reducing lending rate only, but it is not caring about general people, he said.
However, both lending rate and interest rate spread decreased to 11.93% and 4.87% respectively in March, thanks to intensive monitoring by Bangladesh Bank.
At the same time, the rate of inflation has been falling steadily with prudential monetary management from Bangladesh Bank.
The average annual rate of inflation stood at 6.57% at the end of April, according to the release.
Bangladesh Bank has therefore been promoting credit flows to the productive sectors at a lower rate of interest through various financial inclusion activities contributing towards socioeconomic development along with ensuring financial and macro stability.