The interest rate on bank loans for April based on the Six-Months Moving Average Rate of Treasury Bills (SMART) system has been announced by Bangladesh Bank.
The Banking Regulation and Policy Department of Bangladesh Bank issued a circular in this regard on Sunday. The SMART increased by almost 1 per cent to 10.55 per cent in March, from 9.61 per cent in February and 8.68 per cent in January.
Banks will be allowed to add a maximum 3 per cent to the SMART number when signing loan agreements in April, down from 3.5 per cent in March.
As a result, the interest rate on bank loans will be charged a maximum of 13.55 per cent in April, while the interest rate on consumer loans will be a maximum of 14.55 per cent as a bank can charge a 1 per cent supervision fee for consumer loans.
The interest rate on bank loans in March was 13.11 per cent, while it was 14.11 per cent on consumer loans. Before that in February, it was 12.43 per cent and 13.43 per cent. In January this interest rate was 11.89 per cent and 12.89 per cent.
As the SMART rate increased more than expected in March, the BB reduced the 'SMART' margin rate that banks are allowed to add by 0.50 per cent in the interest of consistency with the monetary policy. The BB cut the margin by 0.25 per cent in February.
As per the new guidelines, the margin added for pre-shipment export loans and agricultural and rural loans will be a maximum of 2.0 per cent in April, which was 2.50 per cent in March.
Generally, the loans taken from banks for purchasing personal and consumer goods such as car loans, housing loans, and education loans, including refrigerators, TVs, computers, etc., are consumer loans.
On the issue, Policy Research Institute Executive Director Dr Ahsan H Mansur said, the central bank has no choice other than increasing interest rates to control inflation.
“The interest rate hikes would continue till the inflation rate comes down to 5-6 per cent, only then will the interest rate stabilise. During this period, industries and personal borrowers will suffer, but they must face the reality.”
Through this hardship, the economy will gain strength and stability, he said.
Meanwhile, speaking to The Business Post, former lead economist of World Bank Dhaka Office Dr Zahid Hossain, “The regulator is trying to keep them happy. These businessmen – who have a lot of influence – are angry about the increased interest rate.”
“The regulator lacks proper initiative to rein in the high inflation. The cut down of margin interest is not relevant to monetary policy, because the central bank shoulders the responsibility to curb the high inflation.”
Several countries have successfully curbed high inflation, but the Bangladesh Bank is yet to handle this issue as yet, he added.
The managing director of a private bank, on condition of anonymity, said, “The government's high borrowing from banks is causing an increase in treasury bills and bond rates. Currently, the central bank is borrowing more from the private banks.
“This in turn is affecting the private sector in our country.”
