Bank lending rate slightly increased in August compared to July, according to the latest Bangladesh Bank (BB) data.
Six-month Moving Average Rate of Treasury bills (SMART) was increased by 0.04 per cent to 7.14 per cent in August up from 7.10 per cent in July, said the data.
After lifting the interest rate cap in July, the central bank set new interest rate calculation methods, which is known as the SMART rate.
By this new calculation method, banks can add 3 per cent additional margins with the SMART rate. So the bank lending rate was 10.14 per cent in August. It was 10.1 per cent in July.
Experts have said that the interest rate hike could not tame ongoing high inflation. Bankers are also not happy with the new rate because banks’ deposit rates are increasing due to high inflation and liquidity shortages.
Toufic Ahmad Choudhury, former director general of Bangladesh Institute of Bank Management, told The Business Post, “Interest rates should have been made market dependent. However, the government is buying the treasury bills, so there is a sort of behind-the-scenes control of this new rate. The bankers are not happy about it.”
The financial sector expert added, “We need to focus more on controlling food inflation than raising interest rates because such inflation is increasing due to supply-side disruptions. The government should take initiatives to stop the arbitrariness that the businessmen are doing at various times.”
In July, point to point inflation rate was 9.69 per cent, which was high from the recently bankrupt Sri Lanka. That country’s inflation rate was 53.2 per cent in January, but in July that came down to just 4.6 per cent.
Besides, the excess liquidity position in the banking sector declined by 18.26 per cent to Tk 1,66,272 crore in June, which was Tk 2,03,423 crore in June last year.
