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Spread rate of commercial banks comes down to 6.8 per cent

The average spread rate of the commercial banks came down to 6.62 per cent in the first nine months of the current fiscal year, according to central bank data.

The central bank had earlier directed the commercial banks to bring down the spread rate – difference between deposit and lending rates – to five per cent, by the starting of the new fiscal year.

The central bank data revealed that the spread rate has been gradually coming down. “The spread rate stood at 6.85 per cent in the sixth month, 6.76 per cent in the seventh month, 6.73 per cent in the eighth month and 6.62 per cent in the ninth month,” the data recorded.

The 30 commercial banks have been in an average charging 10.92 per cent interest for loan and paying an average of 4.3 per cent on deposit, according to the report on macro economic situation for the ninth month of the current fiscal year published by the central bank today.

Though, the commercial banks have been complaining of the central bank directive on trying to interfare in the financial market against the free market operation, the central bank is claiming that the banks have been earning huge profit only by widening spread rather than by lending more. The spread rate will definitely hit the profit margin, as the banks currently are surplus with liquidity due to low borrowing and spread rate.

The World Bank and International Monetary Fund (IMF) have also advised the central bank not to adopt spread rate policy as it would impact financial sector sustainability and clip expansion of modern banking. But the central bank argued that the unnatural spread will rather hit the financial market as well as the economy.

According to the central bank report, deposit mobilisation and credit flow increased by 11.4 per cent and 10.9 per cent, respectively, in the ninth
month, by mid-April. “Banks and financial institutions mobilised Rs 135.28 billion in deposits and lent Rs 125.4 billion,” it added.