Bangladesh Bank Eliminates Minimum Deposit Interest Rate On Deposits1 min read
The Bangladesh Bank reportedly has recently revised its regulations on interest rates for term deposits and lending in banks. Previously, in August 2021, the central bank mandated a minimum interest rate on deposits, tied to the three-month moving average of inflation.
However, recently, this floor rate was removed by the Bangladesh Bank, allowing banks greater freedom to set deposit rates based on their operational costs and profitability.
In a related move, the central bank, on November 29, eliminated the 4 percent limit on the spread between deposit and lending rates.
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Additionally, the fixed lending rate of 9 percent was replaced in July with the Six-month Moving Average of Treasury bills, or SMART, as the benchmark rate. Now, banks can charge up to 3.5 percentage points above this reference rate to customers.
Initially, in April 2021, the minimum deposit rate was set at 6 percent and the maximum lending rate at 9 percent. The inflation-linked deposit rate floor was introduced later. However, with inflation consistently exceeding 9 percent for several months, banks have faced challenges in maintaining the interest payouts on deposits.
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