Bangladesh Bank has introduced the country’s first real interbank transaction-based reference interest rates, setting the overnight Bangladesh Overnight Financing Rate (BOFR) at 10.42 per cent and the Dhaka Overnight Money Market Rate (DOMMR) at 10.09 per cent on Wednesday.
The central bank said the rates are based on actual interbank transactions from the previous day and will be published daily to reflect prevailing borrowing costs.
BOFR and DOMMR will serve as formal benchmarks for the money market, guiding banks, financial institutions and investors at the start of each day.
Data on the central bank’s website showed the overnight BOFR was derived from 32 interbank repo transactions involving Tk3,423.14 crore.
The one-week BOFR stood at 10.62 per cent based on 20 transactions totalling Tk10,054 crore.
DOMMR, which reflects unsecured interbank lending, was fixed at 10.09 per cent for overnight transactions, based on 45 deals amounting to Tk2,236 crore.
The one-week DOMMR was set at 10.14 per cent from 42 transactions worth Tk2,638.86 crore.
For longer tenors, the one-month DOMMR was 10.78 per cent from five transactions involving Tk250 crore.
The three-month DOMMR stood at 10.42 per cent based on seven transactions totalling Tk180 crore.
The reference rates will be used as benchmarks for pricing loans, bonds and floating-rate financial products.
Banks will be able to determine lending rates by adding or subtracting a margin over the benchmark, aligning borrowing costs more closely with market conditions.
BOFR is considered a risk-free rate, derived from secured interbank repo transactions where banks borrow funds against government securities as collateral.
In contrast, DOMMR is based on unsecured interbank lending, capturing the rates at which banks lend to each other without collateral.
Bangladesh Bank said it would take action if lending rates are set at abnormally high or low levels relative to the benchmarks or if there is any attempt to manipulate market-based rates.
With the introduction of BOFR and DOMMR, Bangladesh joins countries that use market-based benchmarks for interest rate determination.
Globally, similar benchmarks such as the Secured Overnight Financing Rate (SOFR) are widely used.
The central bank expects regular publication of the rates to enhance transparency in the financial system and provide foreign investors with a clearer picture of market conditions.
Officials said the framework was finalised after trial calculations and consultations with banks since January, aiming to make interest rate determination more realistic and disciplined.
