BRPD Circular No. 01: Rationalization of Rate of Interest on Deposit and Lending

Ref No.: BRPD-Reg-Policy-01 Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. February 7, 2017 BRPD Circular No. 01 Date: ------------------- Magh 25, 1423

To, Managing Director/Chief Executive Officer All Scheduled Banks Operating in Bangladesh.

Dear Sir,

Regarding the rationalization of the rate of interest on deposit and lending.

It has been observed recently that the rate of interest/profit on deposits of banks is decreasing rapidly compared to the rate of interest/profit on lending, and in many cases, it has come down below 5%. The excessive decrease in the rate of interest/profit on deposits is undermining the propensity to save and increases the risk of using savings for unproductive consumption and other non-productive activities. If this situation continues, it may create imbalance in debt asset management in the banking and financial sector, which is not desirable.

In this context, you are advised to remain active to prevent the downward trend in the rate of interest/profit on deposits. To keep the rate of interest/profit on lending in a downward trend, the spread must be narrowed, attention must be paid to various aspects of management efficiency including non-performing loan recovery; the rate of interest/profit on deposits should not be reduced.

Yours faithfully,

(Abu Farah Md. Naser) General Manager Phone: 9530252