The non-bank financial institutions (NBFI) have started to increase their deposit rates to attract more customers and to regain their confidence as the entire sector is going through an image crisis after a series of corruption scandals.
The average deposit rate in the NBFI sector was 7.62% in December, where the banks have taken deposits at an average interest of only 3.99%.
On the other hand, the average lending rate in NBFIs has decreased.
According to Bangladesh Bank, financial institutions disbursed loans at an average interest rate of 10.43% in December. The interest rate on loans from banks in that same period was 7.18%.
A month earlier, in November the financial institutions had an average interest rate of 7.55% on deposits and 10.64% on loans, however, in banks, the average interest rate on loans was 3.99% and on the deposit rate was 7.15%.
From the data provided it was seen that, among the financial institutions, the highest average interest rate on deposits was that of Aviva Finance, which was renamed from Reliance Finance.
Last December, the company took deposits at an average interest rate of 10.24%.
The companies with an average interest rate above 9% are Phoenix Finance and Investment with 9.98%, FAS Finance 9.87%, Uttara Finance 9.69%, Midas Finance 9.38%, CVC Finance 9.32%, Fareast Finance 9.31%, Premier Leasing 9.27%, Prime Finance 9.15% and First Finance at 9.11%.
Former lead economist of the World Bank’s Dhaka office Zahid Hossain told Dhaka Tribune: “Due to a wide range of corruption in five to seven financial organizations, the whole NBFI sector has been facing an image crisis. I think to overcome it, they took the strategy.”
“Though it’s good for depositors I think Bangladesh bank needs to keep an eye on them,” he added.
According to the latest figures published by Bangladesh Bank (BB), the amount of defaulted loans has increased by Tk1429 crore in the first quarter (July-September) of the current fiscal year as compared to the fourth quarter (April-June) of the last FY2021.
The central bank’s data shows that the amount of defaulted loans of the non-bank financial institutions (NBFIs) has reached the tune of Tk11,757 crore after September.
At the end of the June quarter, the amount of the defaulted loan was Tk10,328 crore, which was 15.39% of the total credit.
However, with the aim of implementing the single-digit interest rate, Bangladesh Bank has fixed a maximum lending interest rate of 9% on bank loans from April 2020 and with this, the interest rate on the deposit is fixed at 6%.
However, last year the central bank issued a directive that banks cannot fix the interest rate of the deposits below the inflation rate.
Apart from banks, Bangladesh Bank is also the regulatory body of other financial institutions. However, the financial institutions still have the power to set interest rates on loans and deposits.
