What it is
BFI means Bank and Financial Institution: commercial banks (class A), development banks (B), finance companies (C) and microfinance (D).
When a bank has spare cash for a few days or weeks, it lends to another bank that is short. This is interbank lending. It is usually short-term and low risk.
For most commercial banks this is a small line compared with loans to customers.
How it is calculated
Sum of all loans, advances and placements given to other licensed BFIs, less any provision against them.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL had Rs 1,654.94 crore lent to other BFIs at the end of FY 2082/83 Q4, against Rs 46,031.78 crore lent to customers.
What good looks like
Normally small. A large figure can mean the bank has more deposits than it can lend to customers, or that it lends to smaller institutions as a business.
Watch out
- It is not the same as 'Due to BFIs', which is money this bank owes.
- Lending to a weak finance company carries real risk even if it is 'interbank'.
- It often swings quarter to quarter because the loans are short.
In Nepal
NRB's quarterly format shows this line separately from loans to customers so that readers can see how much credit went to the real economy versus other institutions.
Questions
To earn a small interest on cash it does not need for a few days, and to help the other bank meet its payments.
NRB defines which loans count. Read the ratio page for what goes in; do not assume interbank loans are included.