BB sets 7.13pc reference rate to fix lending rate

Bangladesh Bank (BB) has declared a reference lending rate, which is known as “SMART” (six-month moving average rate of Treasury bills), of 7.13 percent for July.

As per the new rate, the lending rate for banks will rise to 10.13 percent with the addition of a 1 percent supervision fee, meaning the rate will be 11.13 percent for personal and car loans, both of which fall under CMSME (Credit to Micro, Small, and Medium Enterprises) and consumer loans.

As per a BB circular issued today, banks can apply a margin of up to 3 percent over the SMART rate.

The central bank determined the reference rate by calculating the average of treasury bills from December 2022 to May 2023.

Furthermore, the lending rate for agricultural and rural loans will increase to 9.13 percent, up from the existing 8 percent for farm loans and 9 percent for other types of rural loans.

However, the lending rate of 20 percent for credit cards will remain unchanged.

As per the circular, the interest rate cannot be changed within six months of its imposition.

This means that even if the interest rate increases, the bank cannot raise it for existing customers.

Similarly, if the interest rate decreases, the customer’s rate will not decrease.

In the case of early loan repayment, personal loans, car purchase loans under CMSME, and consumer loans will be subject to a proportionate supervision fee of 1 percent.

Therefore, if a borrower wants to repay the loan before its maturity, the bank can charge a supervision fee of 0.50 percent on their loan.

The Islamic banks have also been instructed by the Bangladesh Bank to calculate profits according to the same rules. (BSS)