Just some perspective on why such a deal may even be offered: I'm encountering a similar thing with my bank that doesn't make sense at first glance:
I'm borrowing at 1M HIBOR + 0%. The use for these funds is for specific investments. In my case, investment grade bonds. Fake numbers here, but I essentially Put up 300k and borrowed 700k to buy 1m in bonds yielding ~4%. Return on the 300k is about 11% after interest expense.
That being said, they are ALSO offering me special deposit rates at 5% up until the amount of bonds I purchased, essentially 1 million at 5% (albeit only for a limited amount of time)
So at first glance, it looks like they're lending me at 1M HIBOR (1.15% at time of writing) and allowing me to deposit at 5%.
That being said, I noticed something recently. I was about to use the facility again. Borrow more money to purchase a basket of bonds. I wasn't happy with the bid/ask spread last time when I bought the bonds, so I asked them to tighten the spread. They obliged.
When I was looking to place the promotional deposit ( which I thought would be up to the total amount of bonds I purchased), they told me I couldn't deposit as much this time because they had tightened the spread for me.
Given that, It seems that they make most of their money in this scenario by restricting your use of the lent money to purchase products at fairly egregious spreads.