Although some banks have revised down the interest rate on short-term deposit to 6 percent, they are still offering up to 9 percent on long-term savings
Many banks have not brought down the interest on deposits to 6 percent from February 1 in line with the decision of the Association of Bankers, Bangladesh (ABB).
Although some banks have revised down the interest rate on short-term deposit to 6 percent, they are still offering up to 9 percent on long-term savings.
The ABB, a platform of the managing directors of banks, on January 28 announced that banks will bring down deposit rate to 6 percent from the beginning of this month in a bid to implement the 9 percent lending rate from April 1.
Meanwhile, the newly-elected committee of ABB had a meeting with Bangladesh Bank Governor Fazle Kabir yesterday where they sought the exclusion of small, cottage and micro sectors from the single-digit lending rate loan facilities.
The governor asked the bankers to submit a written application to the central bank and he assured them of discussing the issue with the finance ministry.
Meanwhile, an unhealthy competition has been created in the banking sector as all banks did not bring down the deposit interest rate simultaneously.
For instance, Social Islami Bank has cut down its interest rate to 6.5 percent on deposits for six months and 7 percent for one-year savings, according to the bank.
In a meeting on January 20, Asset-Liability Committee (Alco) of National Bank decided to bring down deposit rate to 6 percent from February 1.
But finally, the bank implemented the decision only for short-term deposits and it is still offering above 9 percent interest rate for long-term savings.
IFIC Bank did not yet revise its deposit rate and is still offering above 9 percent interest.
On the other hand, a number of banks including Islami Bank, Dutch-Bangla Bank, Exim Bank, Eastern Bank and Brac Bank have fully implemented the decision.
The banks which are yet to implement the decision are showing an excuse that they could not yet hold ALCO meetings.
Officials at the banks said they will hold the meeting this week which is essential for making decisions on interest rates.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said, "Banks were closed on February 1. We could not even organise an ALCO meeting. We hope to hold the meeting this week."
Meanwhile, the 4th generation banks are facing some difficulties in bringing down the interest rate on deposits.
The South Bangla Agriculture and Commerce (SBAC) Bank has dropped its interest rate to 6 percent for deposits with a term of one year or above, but is still offering above 6 percent for deposits with terms of three, six and nine months.
Golam Faruque, managing director of the bank, said, "There are some issues with 4th generation banks. The customers have a preference. Why should they deposit their money to a 4th generation bank, and not in the 1st generation, 2nd generation or state-owned banks?
"The newer banks must give customers some additional facilities. We must be given the opportunity to observe the market. We will gradually drop the interest rates for all types of deposits," he added.
NRB Commercial Bank says interest rates for all categories of deposit with the bank have already been lowered.
Md Mehmood Husain, managing director of NRB Bank, said they have reduced the interest rates on all types of deposit to 6 percent from this month in line with the ABB decision.
The 4th generation Padma Bank lowered the interest rates on some types of deposits to 7 percent from January this year.
But NRB Global Bank did not reduce the deposit interest rate. The bank is offering 10 percent interest on three-month deposits and 9 percent on one-year deposits.
Modhumoti Bank has brought down its deposit interest to 6 percent this month.
Meanwhile, clients have expressed their worries as deposit interest rates have dropped close to the inflation rate. In December last year, the annual average inflation of the country was 5.59 percent.