The weighted average interest rate spread in Bangladesh鈥檚 banking sector has remained above 5.8 per cent for 15 consecutive months through to July 2025, highlighting a prolonged imbalance that continues to deprive depositors of fair returns.
The spread, which measures the gap between what banks charge on loans and what they pay on deposits, stood at 5.82 per cent in July, according to Bangladesh Bank data.
This is nearly the double of the 2.93 per cent recorded in June 2023, before the central bank moved to a market-based interest rate regime.
The gap hit 6.03 per cent in June 2024 鈥� the highest since 2008 鈥� and has hovered close to that level ever since. In January 2024, the spread was 4.83 per cent, before rising steadily again.
Bankers and analysts said the widening gap reflects how sharply lending rates have risen compared with deposit rates.
While borrowers now face lending rates of nearly 14 per cent in many cases, depositors are still receiving much lower returns that not only lag behind lending rates but also remain below inflation.
With consumer prices rising at around 8 to 9 per cent, the real return on bank savings has turned negative, discouraging deposits and fueling distrust in the system.
The Bangladesh Bank has raised its policy or repo rate aggressively over the past three years in an effort to contain inflation.
The policy rate, which was only 5 per cent in May 2022, now stands at 10 per cent after a series of hikes, including the latest increase in October 2024.
These hikes have pushed up lending rates across the sector, but banks have been slow to adjust deposit rates in line with the new environment.
Bank officials argue that the challenges facing the sector have limited their ability to raise deposit rates.
Many banks are burdened with high non-performing loans (NPLs), which reached Tk 4.2 lakh crore by March 2025, along with large provisioning shortfalls.
With profitability already under pressure, banks have opted to maintain wider spreads rather than absorb additional costs from higher deposit payouts.
The financial sector is unstable, policies have been shifting frequently, and banks are still struggling with weak balance sheets, they said.
This makes it difficult to raise deposit rates or cut lending rates overnight, they added.
The imbalance is partly rooted in policy shifts. In April 2020, the government imposed a 9 per cent lending rate cap, which sharply compressed spreads.
However, the cap was removed in July 2023, and since then the spread has widened as lending rates rose quickly under market forces while deposit rates moved up more slowly.
The Bangladesh Bank also scrapped the rule requiring banks to keep spreads below 4 per cent, effectively allowing the gap to grow unchecked.
Low deposit returns discourage savings in formal channels, while high lending costs squeeze businesses already facing weak demand and political uncertainty, experts said.
