NBFIs asked to stop spending on deposit collection

Bangladesh Bank yesterday asked non-bank financial institutions (NBFIs) in the country to refrain from spending to collect deposits from people and organisations.

The central bank's directive came after it found that some NBFIs were spending money to mobilise deposits by showing the expenses on various names such as commission, development and business development expenses.

"This is unethical and unacceptable," Bangladesh Bank said in a circular issued to NBFIs.

Such activities are causing unreasonable increases to the cost of funds of organisations, which fuels the interest rate for lending, the central bank said.

As such, Bangladesh Bank directed NBFIs not to bear any implicit expense under any name except for declared interest rate on deposits or profit rate.

The NBFIs will regularly publish their interest rate for deposits on their websites, it added.

A senior official of Bangladesh Bank said deposits should come to the NBFIs because of their goodwill.

Deposits should not be collected by paying commission, he added.

Bangladesh has 35 NBFIs.

Total deposits of the NBFIs rose 0.42 per cent to Tk 44,121 crore during the July-September period compared to the April-June quarter of the same year, according to central bank data.

NBFIs' advances decreased 0.79 per cent to Tk 70,608 crore during the July-September quarter of 2021 compared to the April-June period the same year.

Like banks, NBFIs cannot collect savings deposits. They are allowed to collect deposits for periods of three months and above.