BB removes interest cap on deposits

Bangladesh Bank yesterday withdrew the ceiling on the interest rate of bank deposits, which was imposed on August 2021.

The banking regulator had previously instructed banks not to set interest rates on fixed-term deposits below the inflation rate as it yields negative returns for savers.

A senior central bank official said they withdrew the ceiling as there is no need following the withdrawal of the single digit lending rate, which was replaced by a new lending rate formula in June.

The interest rates on all kinds of deposits have been rising since the withdrawal of the lending rate cap.

Meanwhile, lending rates have been rising in recent times because of the new formula.

As per the new formula, banks can add a 3.75 percent margin to the SMART (Six Months Moving Average Rate of Treasury Bills) when disbursing loans.

The SMART currently stands at 7.43 percent and is increasing due to the growing interest rates of government treasury bills.

In September, the weighted average interest rate on deposits stood at 4.52 percent, up from 4.38 percent in June, figures from the central bank show. It was 4.09 percent in September last year.