Staff Reporter :
The lending rate in the banking sector crossed 13.5 percent from April April,01 as the Bangladesh Bank aimed to control inflation by making borrowing more expensive for commercial banks and the private sector.
Since July last year, the lending rate has witnessed a continuous increase, which was 13.11 percent in March and 12.43 percent in February.
The increase in lending rate follows months of rising Treasury bill rates, with the six-month moving average rate (SMART) reaching 10.55 percent in January.
As per the central bank’s circular issued on Sunday, banks can charge up to 3 percent interest in April from the previous 3.5 percent, taking the total lending rate to 13.55 percent.
The margin will be two percent instead of 2.5 percent for the loans for pre-shipment export and agriculture credits.
The new rates will be effective today, according to a Bangladesh Bank release issued on Sunday.
Meanwhile, as part of the central bank’s move to lower inflation, BB introduced SMART in July last year, moving away from the 9 percent interest rate cap. Since then, the lending rate has continued to rise.
The BB had imposed a 9 percent ceiling on the lending rate in April 2020. However, the restriction was lifted on July 1, 2023.
Experts said it is difficult to control inflation in our country only by
increasing the lending rate.
Likewise, businessmen said that as the central bank follows the new policy, interest rates on loans are now increasing every month. As a result, borrowing from banks is becoming tougher day by day, making business more expensive.
Commenting on the matter, Mustafa K. Mujeri, a former chief economist of the central bank, said that it was a reactionary approach in the face of sustained inflation.
Inflation in Bangladesh climbed regularly, reaching 9.67 percent in February.
Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said: “The rising lending rate is not good for businesses.”
He hopes that the lending rate will come down once the inflow of remittances and export earnings increases.
