Interest rates won't go too high, BB assures businesses

Businesses have sought the US dollar at a fixed rate for import LCs and not to increase the interest rate by much, to maintain a sustainable business environment in the country.

Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) President Mahbubbul Alam on Monday placed these requests to Bangladesh Bank (BB) Governor Abdur Rouf Talukder, during a meeting between the two.

“We met with the central bank governor with a delegation of top businessmen and expressed our concern on the important issues on behalf of the country’s business community,” Mahbubul told reporters after the meeting.

He said many traders have to open Letters of credit (LCs) buying dollars at a higher price than the fixed rate, which impacts the import of goods.

The BB’s governor has been requested not to increase the interest rate of bank loans by large margins as the businesses are already facing difficulties in the depreciation of the domestic currency taka, the FBCCI president said.

The governor assured the businesses that the interest is now fixed according to the smart rate and there is no option to increase the interest rate to an abnormal level in the current system, meeting sources said.

In the new system, the lending rate for banks will be determined at SMART (six-month moving average interest rate) plus a margin of up to 3 per cent.

The SMART reference lending rate would be fixed on the basis of the 182-day treasury bills and announced on the first working day of each month. The central bank controls the interest rates of T-bills and T-bonds.

Referring to the system, the FBCCI president said, "We are very concerned about the rising interest rate and sought cooperation from the Bangladesh Bank so that it does not increase too much."

He said businesses are finding it difficult to open letters of credit (LCs) as they are not getting the dollar at Tk 110, a rate fixed by the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers, Bangladesh (ABB).

Although a number of importers are getting the dollar at the fixed rate, many others are being compelled to cough up an additional amount to open the LCs, the FBCCI alleged.

BB Executive Director and spokesperson Md Mezbaul Haque said businessmen expressed their concerns about the interest rate. The governor assured them that the interest would not rise much.

He also said that the dollar price should not be high since a trade balance is prevailing now in the country.

“Now there is a trade balance here, the dollar price should not be high. BAFEDA and ABB set the dollar rate. We work with the rates they offer," he added.