Spread of 16 banks still much higher

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On 30 May 2018, BB directed all the banks to bring down their spreads to 4%, to reduce high interest on loans

The spreads of 16 private and foreign commercial banks are still much higher than the rate set by the Bangladesh Bank (BB), although the overall spread  in the banking sector has come down to 4.22% following a directive from the Central Bank.

Apart from these 16 banks, the spread of most banks in the country are above 4%.

On 30 May 2018, BB directed all the banks to bring down their spreads to 4%, to reduce high interest on loans.

According to officials, BB issued the directive in order to make the savings schemes more attractive as well as keep the interest rates on loans business friendly.

They added, even after repeated instructions of the Central Bank, several banks mostly do not follow it and foreign banks never agree to the spread limit.

Brac Bank has a higher spread limit. At present, their spread is 7.17%. Selim RF Hussain managing director and CEO of the bank, said: “We usually provide SME loans and the interest rate on SME loan is a little higher. As a result reducing spread is a bit difficult for us. But we are trying to reduce the rate.”

BB Spokesman Sirajul Islam while speaking to the Dhaka Tribune said: “Several banks were warned a few days ago because of their exceeding spread limit. Now, the spread of those banks are gradually decreasing.

“At the end of October, the overall spread in the banking sector came down to 4.22 %, compared to the overall spread of 4.45 % in May.”

The highest spread rate among private banks is 7.41% from Dutch-Bangla Bank Ltd and among the foreign banks; Standard Chartered has the highest rate at 8.55%. The spread is nearly 3% in the state-owned commercial banks and specialized banks.

In January 2018, BB instructed eight private banks to bring down their spread to less than 5% -a directive the banks said to be unfair on them. The banks are: Standard Chartered, State Bank of India, Woori Bank, Citibank, HSBC, Dutch-Bangla, Brac and Uttara Bank.

Source: Dhaka Tribune.

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