NBFIs deposit, lending rates increased by 50 basis points

The Bangladesh Bank has raised the deposit and lending rates for non-bank financial institutions (NBFIs) by 50 basis points each.

The central bank's Department of Financial Institutions and Markets issued a circular in this regard on Sunday (8 October).

The circular states that from now on, any NBFI will be able to pay customers interest on deposits at a rate of six months moving average rate of Treasury bill (SMART) + 2.5%. Previously, it could pay SMART + 2%. For October, SMART has been set at 7.20%. That means NBFIs can now offer a maximum of 9.70% interest on deposits taken from customers.

In the case of lending, institutions can now charge SMART + 5.5% interest. Previously, institutions could charge a maximum of SMART + 5% interest on loans. According to the new rules, NBFIs can charge a maximum of 12.70% interest on loans.

Kyser Hamid, managing director and CEO of Bangladesh Finance Ltd, told The Business Standard, "The central bank has made a very good decision. As interest rates rise, we will now be able to offer customers more interest on deposits than the inflation rate. This will also help us to increase our interest rate spread."

Md Golam Sarwar Bhuiyan, managing director of Industrial and Infrastructure Development Finance Company (IIDFC), said, "Increasing the interest rate on deposits will increase our cost of funds. This will impact the profits of NBFIs."