The gap between lending and deposit rates in Bangladesh has widened, reaching 4.66% in December 2023 from 3.31% in September, signaling increased profitability for banks. Lending rates surged to 9.36% from 7.22% a year ago, while deposit rates increased more modestly, from 4.23% to 4.70%. This disparity affects depositors’ profits while borrowers face higher interest charges amidst persistent inflation. The removal of the 9% loan disbursement cap in July 2023 contributed to rising loan rates. Banks prioritize profit maximization, often raising lending rates before deposit rates. Despite recent adjustments, deposit rates remain lower than inflation, discouraging customers and slowing deposit growth. To maintain bank profitability, Bangladesh Bank lifted the upper limit on the interest rate spread to 4%, allowing flexibility in investing at higher rates while attracting deposits at lower rates.
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