In a significant move to attract more foreign currency into the country’s banking system, Bangladesh Bank has decided to remove the cap on interest rates for Resident Foreign Currency Deposit (RFCD) accounts. This decision allows banks to set their own interest rates based on the relationship with the customer, potentially leading to better returns for depositors.
Previously, the interest rates for these accounts were strictly regulated, capped at a maximum of 1.5% above the SOFR (Secured Overnight Financing Rate), making the highest possible rate 5.14% plus 1.5%. However, under the new directive issued on Thursday by the foreign currency and policy department of Bangladesh Bank, these limits have been abolished.
The regulatory change is expected to increase the inflow of US dollars into the country, as depositors who previously might have kept their dollars abroad or at home due to unattractive returns might now consider banking them in Bangladesh. Local banks, such as Eastern Bank, The City Bank, BRAC, Dutch-Bangla, Prime Bank, Pubali, Standard Chartered, and HSBC, stand to benefit from increased deposits, which can now also include other major currencies like the Pound, Euro, Australian Dollar, Canadian Dollar, and Singapore Dollar.
This policy adjustment is part of Bangladesh Bank’s efforts to streamline the processes and make banking with foreign currencies more lucrative for the residents. It follows another notice from December 3 last year, where the central bank had already enhanced the benefits associated with RFCD accounts to encourage repatriation of dollars kept at home by expatriates and residents.
Furthermore, the RFCD accounts are not just for saving; they come equipped with debit cards that do not require authorization for expenditures, making them a powerful tool for international travel, online shopping, and educational and medical expenses abroad.
As a result of these changes, Bangladesh Bank anticipates a more robust banking sector capable of better serving the needs of its customers while ensuring the economic stability of the nation through improved foreign currency reserves.
