The cost of managing credits in non-bank financial institutions (NBFIs) has continued to rise, leading to a decline in profitability, according to industry insiders and officials. Since deposit and lending ceilings were imposed in July 2022, NBFIs have been struggling to cope with mounting Non-Performing loan (NPL) buildups that have left them in their current state.
The Cost of Funds Index (CoFI) released by the Bangladesh Bank (BB) shows that the weighted average cost of funds in July 2022 was 6.58%, rising to 7.10% in February 2023. Meanwhile, the adjusted cost of credit continued to grow, reaching 8.10% in February 2023 from 7.55% recorded in July last year. In light of these circumstances, NBFIs are finding it difficult to make an immediate turnaround. To remain in business under the current context, many NBFIs have started offering higher rates than the ceiling, which has raised their costs. Industry insiders suggest that the existing caps need to be uncapped to give NBFIs some breathing space.