BB withdraws bars to collect deposit rate
Staff Reporter :
Bangladesh Bank (BB) has withdrawn the minimum interest rate guidelines for collection of deposits.
From now on, banks will be able to set interest rates as per the market equilibrium and collect deposits accordingly.
In a circular published on Tuesday, the central bank basically taken this move to go forward to introduce a market-based interest rate system.
The Banking Regulations and Policy Department of BB issued this notification and sent it to the top executives of the scheduled banks for immediate execution.
According to the new directive, the BB’s circular to this effect issued on August 8, 2021 has been ineffective where the central bank imposed a condition that the interest rate on term deposits should not be less than the average inflation rate. As a result, the minimum interest rate on deposits was set at 6 percent.
Earlier, in April 2020, the Bangladesh Bank fixed the interest rate on all types of loans, except the credit cards, at 9 percent.
However, In July this year the market-based interest rate for lending has been introduced.
As a result, minimum interest rate on deposits becomes less contextual.
According to Central Bank sources, as the country’s overall price inflation was 9.49 percent in last November.
Food inflation has been above 12 percent for four consecutive months since last August.
Bangladesh Bank has decided to increase the interest rate of bank loans to deal with this crisis along with meeting conditions attached to the International Monetary Fund’s $4.5 billion loan. It has been implemented since last July.
In order to tame the skyrocketing inflation, the Bangladesh Bank again raised the lending rate to 10.70 percent in last October.
Bangladesh Bank currently implementing SMART interest based on six-month moving average rate of treasury bills.
From November 27, the Bangladesh Bank has raised the SMART rate by 25 basis points to 3.75 percent.
After incorporating the SMART rate into the treasury bill rate of 7.43 percent , the lending rate surge to 11.18 percent.
