Single digit interest rate: Single-digit will erode banks’ profit, but is their current profit logical? | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Friday
June 13, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
FRIDAY, JUNE 13, 2025
Single-digit will erode banks’ profit, but is their current profit logical?

Analysis

Jebun Nesa Alo
10 February, 2020, 11:45 am
Last modified: 10 February, 2020, 12:58 pm

Related News

  • Pros and cons of single digit interest rate
  • Banks start slashing deposit rates
  • Time to revisit the concept of insider lending?
  • Single digit interest rate to discourage savings, squeeze lending: BB report  
  • Single digit interest rate for all loans from April 2020: Finance minister

Single-digit will erode banks’ profit, but is their current profit logical?

The implementation of single-digit rate will rationalise banks’ profit and compel them to be more efficient in fund management as well

Jebun Nesa Alo
10 February, 2020, 11:45 am
Last modified: 10 February, 2020, 12:58 pm
Representational image
Representational image

Bankers argue that the implementation of single-digit lending rate will erode profit margin of the banks. But many question if the banks' current profit margin is rational.

Currently, banks' profit margin before tax is around 70 to 80 percent, which is the highest in comparison to any other sector.

The implementation of single digit will bring it down to about 20 percent when a 10 percent earning is considered good for other businesses.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

If an example is taken for impact analysis, it shows that single-digit lending rate is workable.

For instance, Eastern Bank, which is considered one of the most efficient banks, has been managing funds at a cost of 4 to 5 percent. If an average administrative cost of 1.5 percent is added, its cost stands at 5.5 to 6.5 percent.

Despite that low fund cost, the bank has been charging interest rates of 12 to 15 percent on loans. As a result, the income margin of the bank is above 120 percent.

If the 9 percent lending rate is implemented from April 1, the bank's income will come down to 63 percent.

On top of that, the bank will have to pay corporate tax over the income.

EBL's net profit was Tk311 crore in 2018.

The scenario is almost the same for many private commercial banks.

Foreign banks are even better positioned in profit-making.

For example, Standard Chartered Bank is lending at a rate 11 times higher than its deposit rate, according to Bangladesh Bank website.

Despite having low fund cost, some banks are lending at high rate as the average industry rate is quite high because of inefficient asset management. This helps some banks make unusually high earning and they also spend high on operation.

The private bankers enjoy comparatively high salary which is considered one of the major reasons for high operational cost.

A management trainee officer, an entry level post of a bank, gets salary between Tk50,000 and Tk70,000. In comparison, entry level BCS cadre officers get around Tk35 thousand, much lower than the bankers.

However, the bankers' efficiency is not reflected by the rising non-performing loans and deterioration of banks' health.

The implementation of single-digit rate will rationalise banks' profit and compel them to be more efficient in fund management as well, said a senior executive of a bank.

It will also prompt banks for job cut or slash pay structure to bring balance in salary range with other sectors, he said.

However, some banks like the scam-hit BASIC Bank and the fourth-generation banks will suffer badly from implementation of the single-digit policy, said industry insiders.

Sharing his experience, a top executive of a fourth-generation bank said their internal calculation shows that implementation of the single-digit lending rate will cause a loss of Tk185 crore for the bank this year alone.

Photo: Jebun Nesa Alo/TBS
Photo: Jebun Nesa Alo/TBS

The bank has already started to get rid of high-cost institutional deposits to reduce its cost of fund. It is also planning job cut, he said.

Banks must improve their efficiency in managing cost of fund for implementing of single-digit interest rate and many banks will have to ultimately go for merger, he said.

Top News / Banking

Single digit

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • BNP Acting Chairperson Tarique Rahman and Chief Adviser  Muhammad Yunus meet at Dorchester Hotel in London, UK on 13 June 2025. Photo: CA Press Wing
    National polls possible in 2nd week of February, agree Yunus, Tarique in 'historic' London meeting
  • Election Commission building at Agargaon in the capital. Photo: Rajib Dhar/TBS
    Election Commission will announce election date soon, hopes Khalilur
  • BNP Standing Committee member Amir Khosru Mahmud Chowdhury speaks at a joint press briefing after a high-level meeting of CA Prof Muhammad Yunus and BNP Acting Chairman Tarique Rahman in London on 13 June. Photo: CA's Press Wing
    BNP satisfied with Yunus-Tarique meeting outcome: Khasru

MOST VIEWED

  • Wreckage of a Boeing 787 Dreamliner showing part of its registration "VT-ANB" in Ahmedabad, India, June 12, 2025. REUTERS/Amit Dave
    Air India Dreamliner crashes into Ahmedabad college hostel, kills over 290
  • File Photo of Chief Adviser Muhammad Yunus: UNB
    Prof Yunus to receive Harmony Award from King Charles today
  • Bangladesh Bank Governor Ahsan H Mansur. TBS Sketch
    Bangladesh mulls settlements with tycoons over offshore wealth: BB governor tells FT
  • Railway seeks Tk2,000cr foreign loans to revive coach assembly, modernise workshops
    Railway seeks Tk2,000cr foreign loans to revive coach assembly, modernise workshops
  • UK Prime Minister Keir Starmer, Chief Adviser Muhammad Yunus
    Disclosure of unconfirmed Yunus-Starmer meeting shows ‘diplomatic imprudence’: Analysts
  • Brother sues Latifur's daughter, widow over alleged forgery to seize control of Transcom
    Brother sues Latifur's daughter, widow over alleged forgery to seize control of Transcom

Related News

  • Pros and cons of single digit interest rate
  • Banks start slashing deposit rates
  • Time to revisit the concept of insider lending?
  • Single digit interest rate to discourage savings, squeeze lending: BB report  
  • Single digit interest rate for all loans from April 2020: Finance minister

Features

Photos: Collected

Kurtis that make a great office wear

1h | Mode
Among pet birds in the country, lovebirds are the most common, and they are also the most numerous in the haat. Photo: Junayet Rashel

Where feathers meet fortune: How a small pigeon stall became Dhaka’s premiere bird market

1d | Panorama
Illustration: Duniya Jahan/ TBS

Forget Katy Perry, here’s Bangladesh’s Ruthba Yasmin shooting for the moon

2d | Features
File photo of Eid holidaymakers returning to the capital from their country homes/Rajib Dhar

Dhaka: The city we never want to return to, but always do

4d | Features

More Videos from TBS

'Historic' meeting between Yunus and Tarique underway in London

'Historic' meeting between Yunus and Tarique underway in London

2h | TBS Today
Iran warns Israel of severe retaliation

Iran warns Israel of severe retaliation

3h | TBS World
Global oil prices soar

Global oil prices soar

4h | TBS World
What did Iran say in response to the Israeli attack?

What did Iran say in response to the Israeli attack?

4h | TBS World
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net