TDS Desk:

Banks will no longer have to abide by the Secured Overnight Financing Rate (SOFR) caps when setting interest rates for Resident Foreign Currency Deposit (RFCD), being instead allowed to fix interests on such deposits on the basis of bank-customer relationship, or the market rate.

The central bank made the announcement in a circular issued today (31 October).

All authorised dealer branches of scheduled banks have been ordered to follow the new rules.

A Resident Foreign Currency Deposit (RFCD) account is a savings account that allows Bangladeshi residents to manage and access foreign currency.

Prior to the new directive, banks would need to pay an additional 1.5% interest on deposits in these accounts on the basis of the international benchmark Secured Overnight Financing Rate (SOFR).

The current SOFR rate is 5.3%, meaning, banks would have to pay 6.8% interest on RFCD accounts.

The head of retail banking of a private bank told The Business Standard on the condition of anonymity that the central bank no longer wants to determine the deposit interest rate and the loan interest rate through circulars.

The regulator now wants to leave these matters to the market.

The private banker also said deposits made in RFCD accounts are current deposits.

“These dollars can be withdrawn by the customer at any time. At present, a customer enjoys a maximum of 2% interest on deposits amount in taka made in current accounts.”