BB caps banks' interest rate gap at 4pc to ease borrowing costs

The Bangladesh Bank (BB) has directed all scheduled banks to keep the gap between their average lending and deposit interest rates within 4 per cent, aiming to make loans more affordable for businesses and support economic growth.

In this regard a circular was issued on Monday by the central bank.

The BB said it has recently noticed that many banks have been raising lending rates much faster than deposit rates. 

As a result, the difference between what banks charge borrowers and what they pay depositors has widened sharply, increasing borrowing costs for businesses.

Under the new instruction, the maximum intermediation spread has been fixed at 4 percent for all types of loans except credit cards and consumer finance. 

The move is expected to encourage banks to offer loans at more reasonable rates while maintaining a fair return for depositors.

Bangladesh Bank said the decision has been taken under the powers of the Bank Companies Act, 1991. The circular came into effect immediately from the date of its issuance.