Both lending and deposit interest rates are seen to be following declining trends particularly towards the end of FY20
Non-performing loan (NPL) situation of banks could deteriorate in the long term if the transparency, accountability, and good governance practices are not effectively ensured.
Bangladesh Bank (BB) on Wednesday announced the latest Monetary Policy Statement (MPS) for the current fiscal year with the main objective for the recovery of the economy.
However, feedbacks from economists, policymakers, and stakeholders have raised some concerns over the issues that developed recently in the financial sector of Bangladesh.
Even so, BB's recent policy measures helped significantly to improve the NPL situation by allowing banks' rescheduling of default loans by 2 percent down payments and an exemption of borrowers from rescheduling their bad loans.
They argued that BB's policy direction for rationalising interest rates/profits by executing 9 percent lending rate cap might seriously hamper the growth of small and medium-sized enterprises whose monitoring and management costs are relatively higher in nature.
Both lending and deposit interest rates are seen to be following declining trends particularly towards the end of FY20.
The gap between lending and deposit interest rates (interest rate spread) that viewed as a measure of intermediation efficiency of banks has also been markedly narrowed down since April 2020 due mainly to BB's policy direction for rationalization of interest rates/profits on banks5 lending and investment, with effective from 01 April 2020.
Along with the reduction in the intermediation spread, both the deposits and advances maintained their growing trends in FY20 supported by the Government's execution of discipline on the issuance of NSCs.