Within a month of introducing the reference rate-based new interest-rate regime, the Bangladesh Bank has made a major change by relaxing the rate for pre-shipment export loans.
According to the latest development, the central bank has asked commercial banks to add a maximum of 2-percent margin to the reference lending rate, known as the SMART (six-month moving average rate of Treasury bill), when fixing the interest rate of pre-shipment export loans.
The Banking Regulation and Policy Department (BRPD) of the Bangladesh Bank issued a circular instructing banks to follow this new rate before finalising the interest rate.
A pre-shipment export loan is a short-term loan that is provided to exporters to finance the purchase, processing, manufacturing, or packing of goods prior to shipment.
According to the central bank circular, in cases where all instalments of a loan or partial instalments have become overdue, a maximum of 1.5 per cent penalty interest can be imposed on the entire outstanding loan of a working capital loan or on the instalments of a demand loan that are behind schedule.
BRPD Director Mohammad Shahriar Siddiqui said the move aims to make export-oriented companies more resilient against shocks stemming from the ongoing global economic crisis, helping them thrive and ensuring more efficient credit management in the banking sector.
He said the lending rate for other loans will remain the same, with a maximum margin of 3.0 per cent added to the SMART rate of 7.10 per cent.
"Export-oriented industries are very important for the country's overall economic growth. That's why they receive a subsidised rate. Previously, the maximum rate was 7.0 per cent," he added.
Last month, the central bank introduced the market-based lending rate for banks, replacing the 9 per cent lending rate cap that had been in place since April 2020.
While bankers welcomed the move, as it would provide some earning space for them, economists criticised the latest move of BB for being an anti-open market intervention.
In condition of anonymity, the chief executive officer of a private commercial bank said the move would bring some positive outcomes to some extent for banks that could charge a maximum of 7.0 per cent before this latest instruction.
"Now, we can charge a maximum of 9.10 per cent in accordance with the SMART rate, which is now 7.10 per cent," he added.
Emranul Huq, managing director and CEO of Dhaka Bank Limited, said bank earnings would increase to some extent with the latest directive of the central bank.
He mentioned that exporters had been getting pre-shipment credits at a subsidised rate of 7.0 per cent, and now their costs will go up.
When contacted, Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur said the BB introduced a market-driven reference rate-based lending regime last month and introduced the SMART rate without differentiating anything.
"Then why did it (BB) issue such a circular? It means the central bank is not allowing a market-based lending rate," he said.
Raising questions over the fixation of the SMART rate, the eminent economist added that the central bank has been devolving auctions of treasury bills and injecting print money into the government account to keep the SMART rate under their control.
"It is SMART by name, but in practice, it is the same old BB, which often intervenes in the market," he added.
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