Bangladesh Bank has removed the floor rate of interest on term deposits in banks after lifting the ceiling on lending rates as part of efforts to bring market-based rates.

The banks had been fixing the minimum interest on deposits in line with the three-month moving average of inflation following the central bank’s order issued in August 2021.

It announced the decision to lift the floor on Tuesday, clearing the path for the banks to fix deposit rates in line with their operating cost and profit.
 

The central bank on Nov 29 withdrew the 4 percent cap on spread between the deposit and lending rates.

It replaced the 9 percent lending rate with Six months Moving Average of Treasury bills or SMART as the reference rate in July.

The banks are now allowed to charge customers up to 3.5 percentage points more interest than the reference rate.

The minimum deposit rate was set at 6 percent and ceiling of lending rate at 9 percent in April 2021. Later the inflation-based deposit rate floor was introduced.

But banks have been under pressure to pay interest on deposit as inflation has remained above 9 percent for several months.