NBFIs to cut lending rates to single-digit

The country's non-banking financial institutions (NBFIs) have agreed to lower the interest rates on lending to single-digit from the existing level shortly.

The commitment was made at a meeting held at the Bangladesh Bank (BB) headquarters in Dhaka on Tuesday with BB Governor Fazle Kabir in the chair.

The managing directors and chief executive officers (CEOs) of all the NBFIs were invited to attend the meeting.

"The NBFIs have willingly agreed to reduce their lending rates to single-digit phase by phase," BB Deputy Governor Abu Hena Mohammad Razee Hassan told the reporters after the meeting.

Like the banks, the NBFIs have committed to reduce their lending rates to 9.0 per cent in line with the decisions of their respective board of directors, the BB deputy governor added.

Talking to the FE, Md Khalilur Rahman, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA), said the NBFIs will be able to implement the single-digit interest rate within the next two weeks.

"We'll give priority to women entrepreneurs, small and medium enterprises (SMEs), agro-based industries and manufacturing sectors while bringing down the interest rates to 9.0 per cent from the existing level," he added.

At the meeting, the top executives urged the central bank to intervene in the state-owned commercial banks (SoCBs) for depositing their funds with the NBFIs at 6.0 per cent interest rate like the private commercial banks (PCBs).

At a meeting of bankers on Monday, the SoCBs disclosed their decision of providing deposit to the PCBs at 6.0 per cent interest rate for implementing the single-digit lending rate.

"We've sought deposit from the SoCBs at 6.0 per cent," the BLFCA chief said while replying to a query.

Talking to the FE, Mominul Islam, MD and CEO of IPDC Finance, said: "We've decided to decrease the interest rates on fresh deposits below 7.0 per cent from the existing level to take the lending rates within 9.0 per cent."

The NBFIs are allowed to collect deposit from individuals and organisations. Currently, they are offering interest on term-deposit at rates ranging from maximum 14.87 per cent to minimum 5.0 per cent, according to the BB's monitoring report for the January-March period of 2018.

The NBFIs have been advised to look for alternative instruments, including issuance of bond, along with taking deposits from various sources.

"We've advised the NBFIs for taking effective measures to issue bonds to meet long-term financing demand for industrialisation," the BB deputy governor added.

The BLFCA leaders will meet the chairmen of the National Board of Revenue (NBR) and the Bangladesh Securities and Exchange Commission (BSEC) soon to discuss about issuing bonds easily, according to Mr. Rahman.

At the meeting, the NBFIs also proposed to form a special revolving re-financing fund only for the financial institutions to meet their liquidity requirement, meeting sources said.

The central bank, however, declined the proposal, suggesting the NBFIs to avail such facility from the existing re-financing schemes, they added.

Currently, 34 NBFIs are operating in the country. On June 21, the central bank advised them to fix interest rates on deposit at a reasonable level for ensuring stability in the country's financial sector.

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