BB to withdraw single digit lending rate soon

Bangladesh Bank (BB) is likely to withdraw the single digit lending rate after three years to meet the condition of the International Monetary Fund (IMF), said central bank officials.

The issue was discussed in a meeting of the BB’s monetary policy committee on Sunday. The central bank Governor Abdur Rouf Talukder presided over the meeting.

BB officials said that the central bank is going to take a policy on lending rate and fix the rate like the interest rate of foreign loans.

Bangladesh Bank will fix the rate adding 4 per cent or 5 per cent to the average of the interest rate of five types of bonds, said sources from the meeting.

Now, two years tenure bond’s interest rate is 7.55 per cent; five years tenure bond’s rate 7.90 per cent; ten years tenure bond’s rate 8.33 per cent; 15 years tenure bond’s rate at 8.77 per cent and 20 years tenure bond rate 8.95 per cent.

The average rate of those bonds stands at 8.30 per cent and after adding 5 per cent interest corridor, the total lending rate will be 13.30 per cent.

However, Bangladesh Bank Executive Director and Spokesperson Mezbaul Haque told The Business Post that the meeting discussed the upcoming monetary policy, which will be announced in June this year.

The meeting also reviewed the targets of previous monetary policy.

The central bank in January this year relaxed the lending rate cap for consumer loans, allowing banks to hike it up to 3 percentage points from the current level.

This means banks can charge up to 12 per cent in interest rates on consumer loans, instead of the previous 9 per cent, as per the monetary policy.

Addressing a session of the Bangladesh Business Summit at the Bangabandhu International Conference Centre, Bangladesh Bank Governor Abdur Rouf Talukder recently said, “We are working on the development of a market-based reference rate. On top of that, we will give a corridor for the lending rates.”