Bangladesh Bank has once again ordered banks to keep the intermediation spread of loans and deposits within a certain limit.
According to the new directive, the weighted average interest rate spread of loans and deposits for all types of loans except credit cards and consumer finance should be limited to a maximum of 4%.
On Monday (June 29), the Banking Regulation and Policy Division-1 (BRPD) of Bangladesh Bank issued a circular in this regard, with immediate effect.
The circular states that all previous directives regarding the loan-deposit interest rate spread were withdrawn when the Six Months Moving Average Rate of Treasury Bill (Smart) and the fixed margin-based loan interest rate system were introduced through the BRPD circular issued on November 29, 2023.
Later, on May 8, 2024, a fully market-based interest rate system was introduced, but no upper limit was set for the intermediation spread.
The central bank said that in recent times, it has been seen that many banks are setting loan interest rates significantly higher than deposit interest rates.
As a result, the difference between the average interest rates of loans and deposits is increasing abnormally.
This is increasing the cost of loans in the business, industrial sector and productive sector, which is having a negative impact on economic activities and investment.
In this situation, Bangladesh Bank has issued this new directive to keep loan interest rates at a reasonable level in various sectors, including the productive sector. However, this 4% limit will not apply to credit cards and consumer loans.
According to analysts, as a result of this directive, banks will have to be more careful in setting loan interest rates.
At the same time, if the excess gap between deposit and loan interest rates decreases, the financing costs of borrowers in the industrial and business sectors may decrease somewhat and the investment environment may also have a positive impact.