DIBOR Introduced As Benchmark Interest Rate In Bangladesh

January 7, 2009 2:48 p.m. EST

Dhaka, Bangladesh (AHN) - Bangladesh introduced the Dhaka Inter-bank Offered Rate (DIBOR) for the first time, denoting the country's benchmark interest rate in the financial market from Wednesday.

"We've provided our interbank-offered rates to Reuters for publishing on-line according to a decision taken by the Primary Dealers Bangladesh Limited (PDBL) at a meeting held on January 5, 2009," a senior member of the PDBL told AHN in the capital, Dhaka.

He also said eight primary dealer banks initially provided their interbank-offered rates to Reuters for publishing each working day.

The DIBOR is a rate at which the banks will lend to each other for a specific maturity period in the Dhaka market.

It is also fixed every day for reference purpose. It indicates a key interest rate level used for setting rates on loans and floating rates on notes and for calculating cash settlement of derivative instruments of certain interest rates.

The PDBL earlier formed a technical committee to formulate modalities about publishing such an indicative rate, according to the PDBL member.

Under the DIBOR, the banks will publish five tenor rates initially to ensure transparency in the country's money market, he said, added that the rates are overnight, one week, two weeks, one month and three months.

The central bank of Bangladesh earlier selected nine PDs - eight commercial banks and a non-banking financial institution (NBFI) - to handle the government-approved securities in the secondary bond market.

The Bangladesh Foreign Exchange Dealers' Association (BAFEDA) earlier decided to introduce the DIBOR from January 2009 and formed a four-member sub-committee to formulate the code of conduct for operating the DIBOR properly.

The sub-committee had recommended that banks be invited to provide indicative rates for introducing the DIBOR in line with the London Interbank Offered Rate (LIBOR).

In South Asia, India, Sri Lanka and Pakistan have already introduced their benchmark interest rates to help smooth operation of their financial markets.