Excess liquidity pushes lending rate to single digit

The lending rate stood at 9.94% in November from 10.03% in the previous month, according to the Bangladesh Bank latest data. The deposit rate slipped to 5.29% during the same month from 5.33% in the previous month. “Lending rate in the banking sector was in downturn from the last two years amid slump business activities,” said a senior executive of the central bank. Moreover, business community has been demanding to bring down the lending rate to single digit for a long time. In this perspective, banks cut down their lending rate to single digit, he said. Though the average lending rate came down to single digit in November, banks had been lending at a single digit to different sectors from several months earlier, said a senior executive of a private bank. “Some private banks are offering house loans between 8% and 9% from last year.” He said: “The existing lending rate is very affordable for business and it will be helpful to reduce business cost.” The low lending rate raised credit demand in the market. The private sector credit growth remained steady at 16% in recent months, according to the central bank data. The average lending rate of the state-owned banks stood at 9.13% in November followed by specialised banks at 8.91%, foreign banks at 8.36%, but the private banks still remained at double digit lending rate of 10.27%.  Some 27 banks are lending at single digit as of November. Of them, four are state-owned banks, two specialised banks, eight foreign banks and 13 private banks. New banks are lagging behind business competition with the old banks as they could not cut down their lending rate to an expected level. All nine new banks are lending at between 11% and 13%, according to the central bank data. Of them, The Farmers Bank and Union Bank offer the highest lending rate at 13.52% and 13.49% respectively.