Now non-bank financial institutions (NBFIs) are also freed from the fetters in interest fixing, five months after disbanding the SMART-centric interest-fixing mechanism on the money market, giving all the lenders a freeplay.
The Department of Financial Institutions and Markets (DFIM) of the central bank issued a circular dismantling the SMART-driven arithmetic to fix rate on the money market and asked the NBFIs to go by market-driven interest rate.
Shortly after abolishing the SMART regime by the Monetary Policy Committee (MPC) of the Bangladesh Bank early May last, the central bank instantly issued a circular for commercial banks to discard the system but it did not do the same for finance companies that created some sort of confusion among the NBFIs in terms of setting interest rate, according to the market players.
According to the latest circular, the finance companies will publish sector-wise interest rates for lending and deposit on their websites while the deference of rates between the clients would be 1.0 per cent.
The nonbanks have also been asked to make sure none can overshoot the market rate.
Talking to the FE, additional director of BB's DFIM Ranjit Kumar Roy said they did not issue such circular following the MPC decision to scrap the SMART arithmetic.
As the market players have been demanding such official instructions, he said, they issued it with some clear instructions so that no one can distort the rate taking advantage of the market-based interest regime.
"The FIs have been asked not to charge rates too high and to publish the rates each month on their websites regularly so that we can monitor it," he says.
The NBFIs can adjust the rates every six months.
Managing Director and CEO of Bangladesh Finance Ltd Md Kyser Hamid hails the circular, saying that it will help dispel some of the confusions created for not having such official instructions in place.
He says the deference of rates between good and bad clients has been limited to 1.0 per cent instead of previously charged 3.0 per cent, which would undoubtedly affect the spread.
On the other hand, Mr Hamid notes, the overdue penal charge has been brought down to 0.50 per cent in addition to the regular rate instead of the current practice of 2.0 per cent.
Regarding the penal charge, he says it has been mentioned in the circular that the customer-based penal-charge issue needs to be approved by the board. "Getting such board approval for customer-wise against overdue will be challenging. If we can place bulk of such overdue clients, it will be fine," he adds.
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