The banks’ loan interest rate for March has increased to 13.11 per cent due to the increased Six-Month Moving Average Rate of Treasury Bill (SMART), even though the Bangladesh Bank slashed the margin interest by 25 basis points to 3.50 per cent from 3.75 per cent.
The Bangladesh Bank published the data on Thursday.
Insiders think that the government borrowed through Treasury bills and bonds at higher interest rates. As a result, the banks’ lending rate reached 13.11 per cent, compared to 12.43 per cent recorded in the previous month.
Currently, the six-month Moving Average Rate is 9.61 per cent and margin interest rate is 3.50 per cent.
Dr Zahid Hossain, former lead economist of World Bank Dhaka Office, told The Business Post, “The Bangladesh Bank is giving concessions to businessmen, and this is the reason behind the cut in margin interest by 25 basis points.
“The regulator is trying to keep them happy. These businessmen – who have a lot of influence –are angry about the increased interest rate.”
He added, "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 Bangladesh Bank shoulders the responsibility to curb the high inflation.”
Dr Zahid Hossain said that “Several countries have successfully curbed high inflation, but the Bangladesh Bank could not handle this issue as yet.”
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.”
