The banking spreads of the country’s banking sector during the month of May decreased by 15 basis points Month-on-Month to 7.07 percent from 7.22 percent of the previous month. The banking spreads is the difference between banks’ lending and deposit rates. However, on YoY basis, considerable decline of 58bps was witnessed in the banking spreads compared to spread of 7.65 percent in May FY2011, said the analysts at InvestCap quoting the State Bank figures. The average interest rate spread during 5MCY12 (Jan-May) stood at 7.25 percent as compared to 7.57 percent in the same period last year, showing a decline of 32bpsYoY. Furthermore, the spreads based on gross disbursement and fresh deposit appreciated by 52bpsCYTD to 6.7 percent in May-12 from 6.2 percent in Dec-11.
The weighted average deposit rates on outstanding deposits including zero percent markup increased by 12bpsMoM to 5.88 percent during May-12 compared to deposit rate of 5.76 percent last month. On CY12TD basis, the rate on outstanding deposit remained flat at 5.88 percent. Highest deposit rate witnessed in Public sector funds which stood at 6.10 percent (declined 4bpsMoM) followed by deposit rate on private sector funds which stood at 5.84 percent (up 16bpsMoM).
Yields on outstanding loans including 0 percent markup fell by 3bpsMoM to 12.95 percent during May-12 compared to 12.98 percent witnessed last month. While during CY12TD the rate on outstanding loans fell by 51bps compared to 13.46 percent of Dec-11 rate. Highest lending rates witnessed in Public sector loans which stood at 13.53 percent (declined slightly by 1bpMoM) followed by lending rate on public sector loans which stood at 12.98 percent (declined by 4bpsMoM).
However, the 6M KIBOR, which is the benchmark for almost 80 percent lending to private sector hovered in very low range of 11.95 percent to 12.0 percent during the last five months or so, therefore the spread on fresh lending are on consistent downward trajectory largely after the downward adjustment in lending rates.
On the other hand, stagnant deposit rate is the result of the slower inflow of funds into the banking system that made deposit mobilization task harder resulting into the fall in raising the rate of deposits.
