Wednesday, 25 May, 2022

NBFIs seek review of interest rate

NBFIs seek review of interest rate

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Non-bank financial institutions (NBFIs) will submit a request to Bangladesh Bank (BB) for reviewing the interest rate as many companies are struggling with high operating costs.

The central bank capped the interest rate of NBFI at 7 percent for savings and 11 percent for credit, a higher spread than banks. The rate will be applicable from July 1.

Bangladesh Leasing and Finance Companies Association (BLFCA) Vice Chairman Golam Sarwar Bhuiyan said this is a follow-up step after the interest rate was capped by Bangladesh Bank two years back.

“The price of commodities soared across the world. Bangladesh Bank has decided to contain inflation. However, we must think about the strength of NBFIs. We will share the possibility of the implementation of the new rates after discussing with companies,” Golam Sarwar Bhuiyan, managing director of Industrial and Infrastructure Development Finance Company (IIDFC), told the Daily Sun.

An NBFI is an investment company that is not allowed to take traditional demand deposits — readily available funds, such as those in checking or savings accounts—from the public.

There are 34 NBFIs in the country, according to BB data.

BB claimed that recently some NBFIs collected money with higher interest and issue loans at an unnatural rate of 20 to 30 percent which may create a negative impact on the market.

“Some non-banking financial institutions have recently been offering high interest on deposit, which was playing a role in increasing their cost of fund,” reads a circular on Monday.

The high-interest rate on deposits, according to the circular, has increased the lending rate, which in turn led to a reduced repayment capability of the borrowers and subsequently increased the number of default loans.

Former Bangladesh Bank Governor Dr Saleh Uddin Ahmed said the interest rate of NBFIs will not impact the dispositors at large as those companies have less engagement with big scale investment.

“Some instances of corruption have disrupted the operations of NBFIs. Most people are dependent on traditional banking services for savings and credit. When they can't avail those services from banks, they go to NBFIs. I think the interest rate will not impact the savings culture of people,” Prof Salehuddin told the Daily Sun.