Banks bag windfall from record interest spread

Interest calculating in SMART formula comes as a boon for banking as banks bag windfalls from a record spread between the rates they provide to depositors and take from borrowers. Officials and bankers have said Bangladesh Bank’s monetary-policy shift from monetary targeting to interest-rate targeting pays off for the country’s commercial banks as they saw the widest spread in over nine years to March last. Such leap between the difference of weighted average deposit and lending rates – called spread in banking parlance – gives some sort of respite to the banks which had witnessed their core incomes squeezing since the imposition of 9.0-percent lending cap in April 2020, according to sector-insiders. According to data with the central bank, the weighted average spread rose to 5.11 per cent in March, up by 7 basis points from February’s 5.04 per cent. The official data showed the March spread figure as the highest probably since November 2014 when it was 5.12 per cent. Seeking anonymity, a BB official said the spread started rising in July 2023 when the central bank introduced interest rate-related benchmark rate called SMART. The difference between lending and deposit rates was only 2.93 per cent in June last year before the SMART came into effect on the money market. Afterwards, it started increasing with the figure rising to 3.29 per cent, 3.33 per cent, 3.31 per cent, 3.34 per cent, 3.35 per cent, 4.66 per cent and 4.83 per cent in July, August, September, October, November and December in 2023 and January in 2024 respectively. Managing director and chief executive officer of Dhaka Bank Emranul Huq observes that the lending rate in banks keeps rising quickly because of significant increase in SMART rate every month since its introduction. The deposit rate offered by the banks is also rising but the depositors get the gains once the tenure matures. On the other hand, the banks can charge increased rate from the fresh borrowers each month. “That’s why the spread is widening fast,” the experienced banker says about the interest arithmetic.

Source: https://today.thefinancialexpress.com.bd/first-page/banks-bag-windfall-from-record-interest-spread-1714932971

Private sector credit crosses Bangladesh Bank target in March

Private sector credit growth surged to 10.49% in March, marking its highest level in the last nine months and exceeding the central bank’s target for the month. The growth also marks a 0.53 basis point increase from February’s 9.96%, according to Bangladesh Bank data. The central bank aimed for a 10% credit growth for the January-June period of the current fiscal 2023-24. While the first two months failed to meet the target, credit growth exceeded it in March. Emranul Huq, managing director of Dhaka Bank, told TBS that contractionary monetary policies led to increased interest rates on loans, resulting in lower growth in private sector credit in the previous two months. He said March saw higher imports of food products due to Ramadan, along with increased consumer loans for Ramadan and Eid expenses, contributing to the rise in private sector lending in March. The opening of import LCs in March 2023 amounted to less than $6 billion. Over the past year, there have been only three instances where import LCs exceeded $6 billion. In ongoing monetary policy the central bank has revised downward all money supply targets. Notably, the private sector credit growth target has been reduced to 10% for June, down from the previous 11%. Also, the broad money supply has been trimmed to 9.7% from the earlier target of 10%.

Source: https://www.tbsnews.net/economy/private-sector-credit-crosses-bb-target-march-844006

Market-based interest rate to move soon

The interest rate will move to a fully market-based system “very shortly”, Bangladesh Bank Governor Abdur Rouf Talukder has signalled – apparently in line with the IMF prescription over a $4.7 billion loan package. He thinks we are very close to a market-based interest rate. We are expecting that very shortly we will be moving to a fully market-based interest rate. Implementing a market-based interest rate, adopting a crawling peg system for the exchange rate, and maintaining foreign exchange reserves at a certain level are the topmost conditions to receive the third instalment of the loan. If you deduct the interest payment, which is the primary deficit, it is only 2.6%. So, our fiscal deficit is not that high. However, I think next fiscal year it will be further tightened to 2.4% to 2.5%. Since we have a high cost of borrowing from the domestic side, our interest payment account is increasing every year. But I believe the fiscal deficit is well under control. A fiscal deficit of 2.5% of GDP is manageable. The central bank lent around Tk2 lakh crore to banks in the fiscal 2022-23, resulting in an increase in money supply of only Tk50,000 crore.

Source: https://www.tbsnews.net/economy/banking/market-based-interest-rate-soon-governor-signals-843976

DBL Lifestyles to open Adidas outlet in Dhaka

DBL Lifestyles, a concern of DBL Group, is going to launch an outlet of German sportswear and footwear giant Adidas in Dhaka, offering a range of shoes, sportswear and accessories, to attract the growing affluent class. DBL Group first launched an outlet of globally renowned sports brand Puma in April 2019. Now, it has five Puma outlets in the country — four in Dhaka and one in Chattogram. After the successful endeavour with Puma, DBL Lifestyles secured franchise partnerships one after another. In mid-2023, DBL Group opened a Nike outlet in Banani, offering a wide range of footwear, apparel and accessories. Bata is also an official dealer of Adidas and has been offering its branded products in Bangladesh for the last few years.

Source: https://www.thedailystar.net/business/economy/news/remittance-rose-21-april-eid-3600576