The New Nation - Internet Edition

Bdnews24.com, Dhaka

Despite a trend that shows the private commercial banks are reducing the gap between lending rate and interest on deposit (spread), the foreign banks are moving in the opposite direction. Their spread is widening further, latest statistics show.

The country's central bank governor Salehuddin Ahmed said he will sit with the foreign banks on this issue.

After Bangladesh Bank, country's central bank, applied moral pressure, some 30 private commercial banks operating in the country has lowered their lending rate. As a result the spread has come down to about 5 percentage point from around 6 percentage point in December 2007. But the foreign banks yet to follow this trend.

According to the latest information of Bangladesh Bank (June 30, 2008), the average spread of 30 private banks was 5.09 percentage point. On the other hand average spread of 9 foreign banks is 8.54 percentage points.

The private banks have started reducing spread as a result of a series of meetings with them.

Earlier, in May the central bank issued a circular directing the banks to reduce their spread.

An analysis of data shows that among the foreign banks the highest spread is of Standard Chartered Bank. The spread of this bank is 11.27 percentage point. The rate of interest on deposit in the bank is only 3.69 per cent. The rate of interest on loan (lending rate) is 14.96 per cent.

Among other foreign banks the spread of Hong Kong and Sanghai Bank (HSBC) is 8.67 point, that of Citibank NA is 7.19 percentage point, State Bank of India 4.43 point, Habib Bank 4.43 point, Commercial Bank of Ceylon 5.38 point, National Bank of Pakistan 3.74 point, Woori Bank 11.29 point and Bank Al Falah Ltd 5.03 percentage point.

Bangladesh Better Business Forum led by chief adviser Fakhruddin Ahmed established to infuse dynamism in the economy urged the central bank to continue its moral pressure on the banks to keep their spread below 5 percentage points by lowering the lending rate.