The Bangladesh Bank yesterday introduced a new interest rate-setting method for non-bank financial institutions (NBFIs), a day after it took a similar move for banks. 

As per the new formula, the interest rates on deposits and loans will go up from next month when the new monetary policy for 2023-24 comes into effect.

Under the new arrangement, the BB will introduce a market-driven six-month moving average rate of treasury bills known as SMART for all types of NBFI loans, replacing the lending rate cap.

The move aims to enhance competitiveness in the banking sector and foster a favourable lending environment for businesses and individuals.

The central bank will initially set a monthly SMART based on the weighted average rate that would be calculated on the basis of the interest rates of the six-month short-term treasury bills. The benchmark rate will see adjustments every month.

As per the new formula, the interest rates on deposits and loans will go up from next month when the new monetary policy for 2023-24 comes into effect.

A SMART plus a margin of up to 5 per cent will be applicable for loans extended by NBFIs.

Currently, the interest rate of the six-month T-bill is 7.20 per cent. This means the interest rate on the loans disbursed by NBFIs will be a maximum of 12.20 per cent, up from the 11 per cent ceiling that the BB has maintained since April 2020.

As a result, the lending rate on the loans disbursed to cottage, micro, small, and medium enterprises will go up to 13.20 per cent from 11 per cent. Similarly, the interest rate on auto and home loans, which are considered consumer loans, will increase to 13.20 per cent.

CMSME and consumer loans may be subject to an additional fee of up to 1 per cent to cover supervision costs.

Depositors will enjoy a maximum interest rate of 9.2 per cent compared to the existing 7 per cent.