The interest rate gap between deposit and lending rates in Bangladesh’s banking sector has remained above 5% for 11 consecutive months, leaving depositors with minimal returns on their savings. As of December 2024, the weighted average lending rate rose to 11.84%, while deposit rates only saw a marginal increase to 6%. This significant spread of 5.85% means banks are earning substantially more from loans, while depositors continue to receive insufficient returns.
With inflation consistently over 9% since March 2023, savers are facing negative real returns, further impacting their financial growth. Despite efforts by Bangladesh Bank to manage the situation, banks have been slow to adjust deposit rates, leaving depositors at a disadvantage.The weighted average interest rate gap between deposit and lending rates in the Bangladesh banking sector has remained above 5% for the past 11 consecutive months, depriving depositors of adequate returns on their savings.
According to data from Bangladesh Bank, the weighted average lending rate surged to 11.84% in December 2024, up from 7.75% in July 2023. Meanwhile, the deposit rate saw a modest increase, rising to 6% from 4.46% over the same period.
This led to a spread of 5.85% in December 2024, a substantial increase from 2.93% in June 2023. This widening gap indicates that banks are earning much more from loans while offering minimal returns on deposits. With inflation consistently above 9% since March 2023, depositors are facing negative real returns. In February 2025, inflation stood at 9.34%, following a peak of 11.38% in November 2024 and 10.89% in December 2024.
The interest rate spread, which refers to the difference between the interest rates charged on loans and paid on deposits, has remained above 5% since February 2024, a level not seen since 2015. The spread reached a high of 6.03% in June 2024, the highest since 2008. Despite efforts by the central bank to manage the situation, banks have been slow to raise deposit rates.
Bangladesh Bank Governor Ahsan H Mansur recently confronted several bank managing directors about the stagnant deposit rates during a program on March 4, 2025. However, the bankers failed to provide satisfactory explanations, disappointing the governor.
In the past, the introduction of a 9% lending rate cap in April 2020 had led to a reduction in the interest rate spread. However, the spread began to widen again after the central bank removed the cap in July 2023. On October 22, 2024, the Bangladesh Bank raised the policy repo rate to 10% in an effort to curb inflation, continuing a series of rate hikes that began in May 2022. Despite this, many banks are charging close to 15% for loans while deposit rates remain slow to rise, contributing to the growing spread.
Bankers argue that maintaining a sufficient interest spread is crucial for the sustainability of their businesses, particularly in the current economic environment, where high distress assets and low credit demand are inhibiting their ability to offer higher deposit rates.
