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BB launches cost of fund index

  • Published at 07:23 pm November 27th, 2013

Bangladesh Bank has launched a cost of fund index for financial institutions to rationalise their interest rate, service charges and commissions for protecting the interest of the customers.

“We are going to implement a new monitoring system named base rate system. Its main component is cost of fund index,” Bangladesh Bank Governor Dr Atiur Rahman said, launching the index at its headquarters in Dhaka on Wednesday.

“We have to be careful so that efficiency or inefficiency of fund management of financial institutions is not directly imposed on the clients.” Evaluating the interest rate will be easy for financial institutions by using this cost of fund index as reference rate.

As a result, customers’ interest will be protected and there will be a healthy competition among the financial institutions.

The formulation of this identical base rate method will create level playing field in the overall financial sector, said the central bank governor.

By this based rate system, he said transparency and accountability will be ensured in fixing the interest rate and profit of financial institutions will be sustained.

A large part of funds of financial institutions comes from bank loan. So the fund cost index will play a role to protect the customers’ interest in the financial institutions.