BB hikes NBFI lending rate margin

The Bangladesh Bank has decided to increase the lending rate margin for non-bank financial institutions (NBFI) by 50 basis points, raising it from 5 per cent to 5.50 per cent. This adjustment will result in higher lending rates for NBFIs to borrowers.

The central bank issued a circular in this regard on Sunday.  The NBFIs can lend to borrowers at the highest rate of 12.70 per cent, while depositors will get a rate of 9.70 per cent.

Last week, the central bank increased the policy rate by 75 basis points to 7.25 per cent from 6.50 per cent to make borrowing more expensive and curb inflation.

Repo Rate is the interest rate at which the central bank of a country lends money to commercial banks. With the repo rate hike, commercial banks will now have to borrow money from the central bank at 7.25 per cent interest.

To tame inflation, one of the key measures any central bank can take is to tighten the money flow in an economy. If the key interest rate or the repo rate is raised, then the money will be costly, and the banks will borrow less, causing the money flow to decline.

A senior official of the central bank, on condition of anonymity, said the latest Bangladesh Bank move to hike lending rate margin for NBFIs is part of the regulator’s efforts to rein in inflation.

It should be noted that according to the central bank web portal, the Six Months Moving Average Rate of Treasury Bill (SMART) is 7.20 per cent, applicable for this October.