Banks are cutting deposit rates faster than lending rates as falling government securities yields and weak private-sector credit demand reshape Bangladesh’s money market, squeezing returns for savers while borrowing costs remain relatively sticky.
Maximum deposit rates at some banks fell by as much as 3.12 percentage points between January and August, a review of Bangladesh Bank data shows. Over the same period, changes in rates on large and medium industrial term loans were relatively limited.
The divergence comes as Treasury bill and bond yields have fallen below 9 per cent from 10-11 per cent since December, while the policy rate has been reduced to 9.5 per cent from 10 per cent.
For depositors, the adjustment carries a direct cost. Some deposit rates have fallen to 7-8 per cent while point-to-point inflation remained above 8.2 per cent in August, leaving savers with negative real returns even before tax deductions.
Retired people and others dependent on savings income could feel the squeeze more sharply.
Dhaka Bank made one of the steepest cuts. Its maximum rates on deposits of six months to less than one year and one year to less than two years fell to 7.38 per cent in August from 10.50 per cent in January, a decline of 3.12 percentage points.
The bank also cut its rate on deposits of three months to less than six months to 7.50 per cent from 10.25 per cent. Its maximum industrial lending rate, however, remained unchanged at 14.75 per cent.
Bank Asia, City Bank, Eastern Bank, Sonali Bank and Standard Chartered Bank also lowered rates across different maturities.
City Bank cut rates across all reviewed deposit maturities. Its rates for three months to less than six months and six months to less than one year fell to 8.35 per cent from 9.26 per cent, while its maximum industrial lending rate remained unchanged at 14 per cent.
Standard Chartered Bank reduced its maximum rate for deposits of three months to less than six months to 3.25 per cent from 5 per cent, although its longer-term deposit rates increased. Bank Asia lowered its maximum rate for three months to less than six months to 7.50 per cent from 9.13 per cent.
Eastern Bank cut its rate on deposits of two years or more to 7.88 per cent from 8.75 per cent while leaving rates on deposits of less than two years unchanged. Its maximum industrial lending rate eased to 13.50 per cent from 14 per cent.
Mutual Trust Bank recorded mixed movements, with short-term deposit rates rising while rates for one year to less than three years declined by up to 0.50 percentage point. Its maximum industrial lending rate fell to 13.50 per cent from 14.50 per cent.
Sonali Bank made small cuts across some deposit maturities but raised its rate for deposits of six months to less than one year. BRAC Bank also recorded mixed movements, with some rates falling and others rising by several basis points.
Padma Bank, Southeast Bank and Pubali Bank kept their maximum deposit rates unchanged across five maturities. Pubali Bank’s maximum industrial lending rate also remained unchanged at 15 per cent.
The repricing reflects a sharp decline in returns on government securities, which compete with private credit for banks’ funds. Yields on 91-day, 182-day and 364-day Treasury bills have fallen from around 12 per cent at the end of June 2025 to 8.32-8.47 per cent at the latest auction on 20 September.
IDLC Finance Head of Treasury Nurul Karim Patowary told TIMES of Bangladesh that Treasury bill and government bond yields play a significant role in determining market deposit rates. Banks and non-bank financial institutions generally adjust deposit rates in line with movements in government securities yields, both upward and downward.
“Expanding credit requires more than adequate liquidity. Financial institutions also need a business-friendly operating environment, supportive infrastructure, and a sufficient pool of creditworthy borrowers with demonstrated repayment capacity and viable cash flows to facilitate sustainable credit growth,” he said.
Bankers said deposit rates typically fall faster than lending rates because existing high-cost deposits take time to mature and feed through to banks’ average funding costs. Lower policy rates also put downward pressure on funding costs and Treasury yields.
Another bank’s treasury official said weak loan demand amid energy and infrastructure constraints and slow growth had left stronger banks with surplus funds, which were being invested in Treasury bills and bonds.
Stronger banks can therefore attract deposits at lower rates, while weaker banks may continue to face liquidity pressure despite offering higher returns, the official said.
Private-sector credit growth, meanwhile, remains below 5 per cent, its lowest level in decades.
