Non-bank financial institutions (NBFIs) in Bangladesh experienced a significant decrease in profits during the January-March quarter compared to 2022, largely due to the shrinking gap between borrowing and lending rates. The diminishing deposits in banks and financial institutions, coupled with inflation and economic distress, led weaker banks to offer higher deposit rates, attracting institutional investors away from NBFIs. In order to stay competitive, some NBFIs raised their rates, but the maximum lending rate remained at 11%. Consequently, the interest spread for NBFIs decreased, impacting their earnings. The profit of nine NBFIs dropped between 16% and 99% year-on-year, while the interest spread for NBFIs as a whole reached a historical low of 0.44% in April. Additionally, widespread scams and irregularities within certain NBFIs have further deteriorated their financial conditions, with a surge in non-performing loans reaching 24.61% in September 2022.
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