Bangladesh Bank on Tuesday asked the non-bank financial institutions to abstain from enticing people to keep money with them by offering high interest rate on deposit through short messages (SMS) over mobile phones.
The BB move came after the private bank owners and chief executives made a request to the central bank in this connection with a view to cutting lending rate to single digit by banks from July 1.
A central bank circular issued to the chief executive officers of NBFIs said that a number of NBFIs sent SMS to different professionals through mobile phones to collect fund at high interest rate.
Such move of the entities has been found unexpected and sometimes embarrassing, the BB circular said.
To avoid such situation, the central bank issued the circular. The circular was issued under 18(Cha) of Financial Institution Act, 1993.
A BB official said that a number of NBFIs even offered more than 12 per cent interest on deposit to different professionals through SMS with a view to collecting fund.
Such move of the NBFIs makes it difficult for the private banks to get fund at lower rate and has created a challenging situation for the private banks to bring down lending rate to 9 per cent, the central bank official said.
The BB circular came within a day after the representatives of Association of Bankers Bangladesh urged the central bank to support the private banks with liquidity at around 5-6 per cent interest to cut the interest rate on lending to 9 per cent from July 1.
Since January this year, the government has met a number of demands bank owners made on the pretext of liquidity crisis.
In January this year, the government met the bank owners’ demand for depositing 50 per cent of funds instead of 25 per cent by the state-owned agencies in the private banks.
The bank owners also realised their demand for lowering the bank rate to 6 per cent from 6.75 per cent and cash reserve requirement to 5.5 per cent from 6.5 per cent.
The central bank at the same time extended the advance deposit ratio adjustment deadline for the banks to March 31, 2019 from December 31, 2018.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking