Financial reforms and persistently high bank interest spreads in Bangladesh: Pitfalls in institutional development?

► This paper analyzes bank interest rate spreads and margins in Bangladesh for the period 1990-2008. ► Analysis reveals persistency in interest spreads and margins. ► High administrative costs, high non-performing loan ratio and some macroeconomic factors are the key determinants of interest rate spreads and margins. ► Persistently high spreads and margins in old private banks (established before 1999) are attributed to a certain degree of market power in the post-liberalization period (after 1999). ► Financial liberalization has not contributed to reduce interest spread significantly.