BB introduces transaction-based reference rate in money market
To overcome limitations, Bangladesh Bank has introduced two new benchmark rates using its automated system and real transaction data.
The central bank has decided to base money market interest rates on actual transaction data instead of basing solely on banks' submitted data - such as the Dhaka Interbank Offered Rate (DIBOR).
The new reference rates will be published regularly on Bangladesh Bank's website starting Thursday (15 April), according to an announcement made today (13 April) at a press conference held at the central bank's headquarters, organised by its Debt Management Department.
Bangladesh Bank has undertaken this major reform to ensure transparency and dynamism in the country's financial market.
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Modelled after the global SOFR (Secured Overnight Financing Rate), Bangladesh is introducing a new transaction-based reference rate system.
Officials said that since 2010, Bangladesh has used Dhaka Interbank Offered Rate (DIBOR), which was based on "offer rates" submitted by banks—essentially the rates at which banks were willing to transact. However, many banks did not provide data regularly, meaning the rate often failed to reflect the true market scenario.
To overcome these limitations, Bangladesh Bank has introduced two new benchmark rates using its automated system and real transaction data:
- Bangladesh Overnight Financing Rate (BOFR): A risk-free or secured rate, determined based on interbank repo transaction data.
- Dhaka Overnight Money Market Rate (DOMMR): An unsecured rate, based on call money (collateral-free) transactions.
How the rates will be determined
The Debt Management Department stated that these rates will not depend on the preference of any individual bank. Instead, they will be calculated using a volume-weighted mean, reflecting the average based on transactions.
- For BOFR, overnight and 1-week tenors will be published.
- For DOMMR, overnight, 1-week, 1-month, and 3-month tenors will be available.
To prevent abnormal transactions from distorting the rates, statistical techniques such as outlier management will be applied. If there are insufficient transactions on a given day, a rolling window method will incorporate data from previous working days to ensure consistency and transparency.
Bangladesh Bank expects that this initiative will establish a reliable benchmark for interest rates in the country's financial market. This will facilitate pricing of loans, bonds, and floating-rate financial products.
The reform is also expected to help financial institutions introduce new investment products. Being aligned with international standards, it is likely to improve foreign investors' perception of Bangladesh's financial market.
Officials further noted that the rates have been prepared on a trial basis since March. From 15 April 2026, investors and the public will be able to view these reference rates daily on the Bangladesh Bank website. The central bank has also pledged continuous monitoring and annual reviews to further modernise the system.
