NBFIs asked to refrain from spending for deposit collection

Bangladesh Bank today asked non-bank financial institutions (NBFIs) to refrain from making extra 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 expense.

"This is unethical and unacceptable," according to a circular issued by the BB to the NBFIs.

Such activities are increasing the cost of funds of organisations unreasonably, which fuels interest rate for lending, said the central bank.

The 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, said the central bank.

A senior official of BB 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 and total deposits of the NBFIs hit Tk 44,121 crore in the July-September period, which is 0.42 per cent higher from the previous April-June quarter, according to BB data.

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

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