Abstract
This study aims to present the discussion on the Interest Rate Spread (IRS) of the commercial banks in Bangladesh perspective. This paper also explains the interest rate spread in the commercial banks of Bangladesh using time series data of 60 banks covering the period of 1976 to 2020. The analysis shows that the higher the non-interest income as a ratio of total assets of a bank, the lower its spread. In this study, I tried to show the relationship among the lending interest rate with broad money, inflation, quasi money, official exchange rate, and personal remittance. Variables are using time series data. Here I used some proxy data of Bangladesh Bank based on the time series data from 1976-2020 periods from world development indicator and also collected data from various publications of Bangladesh Bank and other relative sources. In this paper, I used different statistical tools such as bar graph, pie chart, line bar, column, area, etc. The analyze the money supply and its effect on the interest rate spread in Bangladesh and analyze the official exchange rate and trend on interest rate spread. Here shows the efficiency of the commercial banking sector and hence the economic growth and development of Bangladesh.
Highlights
A difference or spread between two related interest rates occurs in many types of business or finance transactions
Afroze, (2013) studied to give an overall idea on the Interest Rate Spread (IRS) of the Commercial Banks in Bangladesh perspective which is Based on the empirical data for the period 1974-2011 drawn from various publications of Bangladesh Bank and other sources, the empirical findings of this study found statistically significant correlation between IRS and deposit rate but no correlation with the lending rate
The study identifies several determinants underlying the determination of IRS in the commercial banking sector in Bangladesh
Summary
A difference or spread between two related interest rates occurs in many types of business or finance transactions As it relates to your business, a spread could be relevant if you are borrowing money or if your business involves lending or arranging for loans for your customers. The scenario of interest rate spread of the banking system in 2021, January was 3.05 where bank rate was 4.00 and schedule banks weighted average deposits was 4.51 and advances 7.56. The last data of October 2021 where the schedule banks weighted average de-posits was 4.01 and advances 7.15 and the IRS was (7.15-4.01) = 3.14. In 2020 the bank rate was 5.00 and IRS in January was 3.97 where the schedule banks weighted average deposits were 5.69 and advances 9.66.
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