What Were the Banking Sector Interest Rates Like During Sheikh Hasina’s Tenure?

Dr. Mamunur Rashid

The chart presents data from January-March 2009 to January-March 2024, showing deposit rates (red), lending rates (blue), and their spread (black) based on Bangladesh Bank’s banking statistics. These represent proportional average rates.

Clearly, had it not been for COVID-19 and the Russia-Ukraine conflict, Bangladesh’s banking interest rates would have matched those of many developed nations.

In December 2022, lending rates stood at just 7.23%, while December 2021 saw the lowest deposit rates at 4.06%.

After Yunus assumed power, lending rates surged to 12.05% by late 2024 due to inflation and other risks – levels last seen during Sheikh Hasina’s tenure in 2014. This means a decade’s worth of progress (2024-2014) has been undone.

Lending rates reveal another critical aspect. Banks determine them using this formula:
K total = K* + (IP + LP + DRP + MRP)

Here, “K” serves as an interest rate index. K* represents risk-free investment returns. IP (inflation premium) reflects additional charges for inflationary pressures. Combined, K* and IP form the risk-free rate. Three additional risk factors apply:

1.  LP (liquidity premium) – increases rates for illiquid investments
2. MRP (maturity risk premium) – higher rates for longer-term loans (e.g., 20-year vs 5-year loans)
3. DRP (default risk premium) – additional charges for borrower default risks, analogous to higher insurance premiums in accident-prone areas

Despite global economic crises from 2016-2023 (including the pandemic and Russia-Ukraine war), Bangladesh maintained sub-10% lending rates. Had loan defaults and capital flight been rampant during Sheikh Hasina’s era, DRP would have driven rates significantly higher. Notably, inflation remained below half these lending rates during this period.

This evidence conclusively demonstrates how misinformation has radicalized a generation that never bothered verifying facts – the same generation that paradoxically claims intellectual superiority while protesting on streets.