The New Nation - Internet Edition

THE top policymakers of the private commercial banks, the other day, raised the issue of linking their high charges and interest spreads to their service costs and the relatively high rates of government's saving instruments and treasury bills. The central bank had earlier asked them to find ways to lower their charges and gaps between deposit and lending rates. The banks should charge reasonable rates, which would be beneficial to businesses, the Bangladesh Bank governor said after a meeting with the members of the BAB (Bangladesh Association of Banks). The private banks agreed 'in principle' to rationalise charges and spreads.

As agreed upon, the BAB would put forward its suggestions by February 28 and the central bank would take the final decision scrutinising the whole situation. The central bank will find a way out taking into account the interests of depositors and shareholders. The governor of central bank said he had no intention to impose any decision on them. The chairman of the BAB stated that private banks gave prompt services and for that they recruited skilled and efficient manpower at higher salaries, which raised their costs.

The interest spread in most banks is about 6 per cent. It would be difficult to reduce spread when interest rate on National Savings Certificates remained 12 per cent and that on 20-year treasury bills 15.5 per cent. The banks still can reduce their spreads by minimising their own costs, as the average deposit rate was 6.76 per cent in September, while deposit grew by 7.3 per cent in July-December. Average spread between deposit and lending rates stands at 5.88 per cent in the state-owned banks, 6.17 per cent in private banks and the highest 8.91 per cent in foreign commercial banks. Rationalisation of interest rates is considered urgent.