EMPIRICAL STUDIES ON HISTORICAL INTEREST RATE SPREAD BEHAVIOR IN BANKING SECTOR IN BANGLADESH

This paper explores the Interest Rate Spread (IRS) of the Commercial Banks in Bangladesh. Using the data of the period from 1989 to 2014 this study found that deposit rates have more variation than lending rates. The paper also found that the IRS of foreign commercial banks is the highest and the IRS of Specialized banks1 is the lowest. The data series for IRS, deposit rate, and lending rate contained a unit root and were integrated of order one. However, the Granger causality test failed to indicate any bilateral causal relationship between IRS and deposit rate, IRS and lending rate, and also to deposit rate and lending rate. The study also found that IRS prevailing in the banking sector of Bangladesh was not high compared to that in its neighboring countries.