At 12.74%, the interest rate charged for exceptional overdraft is still high, more than double the Bank of Israel key interest rate. At the same time, the downward trend in the interest rate charged by the banks in the unlinked shekel sector is continuing, as the Bank of Israel continues its interest rate cuts.
According to figures from the Bank of Israel Banking Supervision Department, the interest rate charged on exceptional current account overdrafts fell 0.62% to 12.74% in August, completing a cumulative 1.99% drop in three months.
The average interest rate on unlinked credit to the public was down 0.52% to 10.14% in August. This interest rate has fallen 1.74% over the past four months.
The average interest rate on fixed-term credit slid 0.48% to 9.2% in August, completing a 1.12% drop over the past four months.
The interest paid by the banks on the public’s unlined shekel deposits is also declining. The average interest rate paid on bank deposits was down 0.48% to 5.8% in August, and has declined by 1.28% over the past four months.
The interest rate paid by the banks on the public’s fixed-term deposits dipped 0.49% in August, completing a 1.34% four-month decline. The maximum interest rate on non-bank gray market loans dropped 0.9% to 25.34% in August.
Since May, the maximum gray market interest rate has fallen by 2.04%. The maximum rate is calculated at 2.25times the cost of unlinked bank credit.
The interest rate spread between debit and credit interest for unlinked shekel credit narrowed by a negligible 0.04% to 4.34% in August. This spread narrowed by 0.13% in May.
On the other hand, the banks’ financial margin in the unlinked sector, the gap between their return on assets and the cost of their liabilities, grew by 0.03% in August.
Published by Globes [online] - www.globes.co.il - on October 21, 2003