The weighted average interest rate gap between deposit and lending rate in banking sector remained above 5 per cent for the past 11 consecutive months, depriving depositors of significant returns on their savings.
According to Bangladesh Bank data, the weighted average lending rate jumped to 11.84 per cent in December 2024 from 7.75 per cent in July 2023, while the deposit rate inched up marginally to 6 per cent from 4.46 per cent during the same period.
As a result, the spread stood at 5.85 per cent in December 2024, significantly up from 2.93 per cent in June 2023, with banks earning substantially more on loans while offering minimal returns on deposits.
With inflation persistently above 9 per cent since March 2023, the inadequate rise in deposit rates has left savers with negative real returns.
The inflation rate was recorded at 9.34 per cent in February 2025, having peaked at 11.38 per cent in November 2024 and 10.89 per cent in December 2024.
The interest rate spread refers to the difference between the interest rates charged by banks on loans and the interest rates they pay against deposits.
For the first time since February 2015, the spread crossed 5 per cent in February 2024 and has remained above that level.
By June 2024, it reached 6.03 per cent, a peak not seen since 2008.
Despite the central bank鈥檚 policy adjustments, banks have shown little urgency in offering competitive deposit rates.
On March 4, 2025, Bangladesh Bank governor Ahsan H Mansur at a programme confronted managing directors of several banks, questioning why deposit rates remained stagnant despite a sharp rise in lending rates.
The bankers failed to provide a satisfactory explanation, disappointing the governor.
Currently, banks are charging 5.86 per cent more on loans than they are paying on deposits.
The introduction of a 9-per cent lending rate cap on April 1, 2020 led to a sharp decline in the interest rate spread at that time.
However, the spread began to increase after the central bank removed the cap in July 2023.
On October 22, 2024, the Bangladesh Bank increased the policy or repo rate to 10 per cent for containing inflation.
The BB has begun to hike policy rate sharply since May 2022 when it was at 5 per cent. It raised the policy rate for the fifth time in the current year.
Currently, many banks are charging close to 15 per cent for loans, while deposit rates have been increasing very slowly contributing to the higher spread.
The Bangladesh Bank removed the limitation of keeping the spread below 4 per cent in November 2023 as the lending rate ceiling was scrapped.
Bankers argue that maintaining a sufficient interest spread is essential for sustainable business operations.
They said that the current economic situation, high distress assets and low demand for credits deter banks to raise deposit rates.
