Banks and non-bank financial institutions (NBFIs) in Bangladesh have begun raising interest rates following the central bank’s release of all interest rates to the market in May. This policy, aimed at controlling inflation, has led to an increase in loan interest rates up to 17-18% at some institutions, compared to a previous maximum of 15%. The central bank is concerned about the negative impact on businesses and is considering intervening to set a reference rate for NBFIs, allowing them a maximum margin of 2% above this rate. A recent meeting with 11 financial institutions discussed keeping the margin flexible to avoid burdening customers. The sector faces a confidence crisis due to past mismanagement and rising non-performing loans, leading some institutions to offer higher deposit interest rates to attract funds. The central bank plans to finalize its decision on the reference rate and margin within a month.
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