What is a finance company?
A finance company (NBFI) is a financial institution that is not a bank but still takes deposits from the public and lends to businesses, car buyers and home buyers. Putting money there means lending it to the company for a fixed period; the deal is that it pays you back with interest at the end.
Many people mistake one for a bank. Banks and finance companies are both licensed by Bangladesh Bank, but the rules they follow and the kinds of risk involved are not the same.
Say Nasrin sees an advert from a finance company offering more than her bank does. She places Tk 200,000 with it for two years. In effect she has lent the money to that company, and getting it back at the end depends on whether the people the company itself has lent to are paying it back.
How it works
Finance companies (previously called non-bank financial institutions, or leasing companies) are licensed by Bangladesh Bank and operate under the Finance Company Act 2023. They lend to businesses, lease equipment and finance cars or homes, and part of that money comes from term deposits taken from the public.
The big difference from a bank: a finance company cannot offer savings or current accounts or cheque books; it only takes deposits for a fixed term. You deposit a lump sum, choose a term, and receive interest at the rate agreed on the day you open it, at maturity or monthly, much like an FDR.
Rates are higher because finance companies pay more for their funding and their borrowers are often riskier. The extra rate is the price of that extra risk. Early-withdrawal rules can be stricter than at banks, and at weak institutions repayment can be delayed even after maturity.
Tk 100,000 kept with a finance company for one year at 11% a year earns Tk 11,000; at a bank paying 9% at the same time, Tk 9,000. The difference is Tk 2,000 before tax. The real question is how much extra risk you take on for that extra money. The rates are only examples.
Common variations
- Term deposits
- A lump sum for a few months to several years; principal and interest at maturity.
- Monthly or quarterly income
- The principal stays locked while interest is paid out regularly.
- Double- and triple-money schemes
- Offers to double or triple money in a set number of years; see the special savings schemes page for how to find the real annual rate.
- Monthly savings schemes
- Monthly deposits like a DPS; some DPS offered through mobile apps are also held with finance companies.
When deposit protection applies
For a long time deposits at finance companies had no legal protection; the old deposit insurance law covered only banks. The Deposit Protection Act 2026 (which replaced the 2025 ordinance) brings finance companies in for the first time, with a separate deposit protection fund for them. The limit per depositor is Tk 2 lakh, the same as for banks.
However, finance companies only become members of the fund from 1 July 2028. So if an institution fails before then, it is not clear that the Act’s Tk 2 lakh protection will apply; what happens would depend on decisions by the government and Bangladesh Bank.
The sector’s recent troubles
Bangladesh Bank data showed about 37% of the loans of 35 finance companies in default in September 2025. In January 2025 the central bank placed 20 institutions in a financially distressed, or “red”, category. Depositors at a number of institutions could not withdraw their money for years, even after maturity.
In early 2026 Bangladesh Bank began liquidating 9 institutions. As announced, individual depositors would get their principal back from a government-funded package of about Tk 5,000 crore, but no interest; institutional depositors would get a share of whatever is recovered from selling assets. In other words, despite the promise of high rates, many ended up with no return for years.
Not every finance company is weak; the gap between strong and weak institutions within the sector is wide. That is exactly why checking each institution matters.
What return to expect
From July 2022 Bangladesh Bank capped finance companies’ deposit rates at 7%, though many paid more. From mid-2023 the cap was replaced by a link to a market benchmark, and in 2024 many institutions took deposits at about 11–12% a year.
Finance companies’ rates usually sit one to three percentage points above bank FDR rates at the same time. If an institution pays far more than the rest of the sector, it is often a sign that it is struggling to attract deposits.
Why people choose it
- Rates are usually higher than banks’ for the same term.
- Licensed and supervised by Bangladesh Bank.
- Available in a range of terms and forms, including monthly income.
- Due to come under deposit protection from July 2028.
Points to weigh
- Bad loans in the sector are very high, and some institutions have failed to repay deposits.
- Statutory deposit protection is not assured before 2028.
- No savings accounts, and early-withdrawal rules can be strict.
- A higher rate is often a signal of higher risk.
Tax
The finance company deducts tax at source when it pays interest. Under the Income Tax Act 2023, in recent years this has been 10% if you have a TIN and 15% if you do not; the annual Finance Act can change these rates.
The interest is part of your total income; when you file a return, the tax already deducted is set against your total tax. Excise duty rules are also set in the Finance Act and can change.
Tax rules can change with each year’s Finance Act. Before a big decision, check the latest rules or speak to a tax adviser.
How to get started
- Check on the Bangladesh Bank website that the institution is on its list of licensed finance companies.
- Look at its latest annual report: the bad-loan ratio, capital, and whether it is making losses.
- Get the term, rate, auto-renewal and early-withdrawal rules in writing.
- Documents: national ID card, photographs, your nominee’s ID and photograph, and your TIN if you have one.
- Keep the deposit receipt safe, and pay into the institution’s own bank account, never to an individual.
Check before you start
- Could I cope if this money were lost or stuck for several years?
- How much higher than a bank FDR is the rate, and why?
- Have I looked at the institution’s bad loans and capital?
- Have I checked the news for whether Bangladesh Bank has flagged the institution as weak or distressed?
- Do I understand when deposit protection applies?
- Is a nominee properly recorded?