BB to cap interest rates of NBFIs

The Bangladesh Bank is going to cap interest rates on Non-Bank Financial Institutions’ (NBFIs) deposits and loans.

This decision came from the central bank’s Board of Directors meeting on Sunday, presided over by Bangladesh Bank Governor Fazle Kabir.

The board of directors decided in principal to cap the interest rate on loans and deposits of NBFIs, Bangladesh Bank Executive Director and spokesperson Md Serajul Islam told The Business Post after the meeting.

Though the central bank had previously capped interest rates on loans and deposits of banks, the NBFIs did not have any such caps, allowing them to impose any interest rate on their clients.

Serajul said the regulator is yet to fix the interest rate on NBFIs, but the move will be finalised soon.

In February 2020, the regulator instructed banks to set a maximum 9 per cent interest rate on all loans except credit cards, as part of the government initiative to bring down the lending rate to a single digit.

The single digit lending rate remains in effect since April 1 of that year.

The Bangladesh Bank’s decision faced huge criticism from both home and abroad, and many said the decision is against the free economy.

After lowering the lending rate, the banking regulator in August last year imposed a cap on banks’ deposit rate as well. The central bank had announced that the interest rate of term deposits must not be less than the inflation rate.

Another senior official of the central bank said the interest rates on NBFIs’ loans and deposits are usually slightly higher compared to banks, but some NBFIs are imposing significantly higher rates, which is illogical.