Higher Smart rate will make loans costlier
Business Desk :
Funds are set to be costlier as the regulator raises the benchmark rate Smart by 1.41- percentage points to 7.2% from July’s 7.1%, with large-scale industries having to pay the highest.
Bangladesh Bank (BB) data published on Sunday show the latest benchmark lending rate.
The central bank of Bangladesh prepares the Smart based on the treasury yields.
Commercial banks use it as their benchmark rate or reference rate for fixing lending rates to be charged from borrowers.
The six-month moving average rate of treasuries (Smart) was 7.1% during July last.
It was 7.14% in August, and now it is 7.2%.
The central bank prepares and publishes the reference rate every month on its official website as a guide for the banking sector to go by.
Sources at the Bangladesh Bank said the Smart rate has been enhanced primarily because of the central bank’s recent policy shift from injecting high-powered money into the economy to contain growing inflation.
The reference lending rate, encapsulated as “Smart”, applies to banks and non-bank financial institutions (NBFIs).
In practice, Smart-plus a margin of up to 3% will be applicable for banks, and Smart-plus a margin of up to 5% for NBFIs.
However, the lending activities for CMSMEs and consumer loans may be subject to an additional fee of up to 1% to cover supervision costs.
There will be no changes in the interest rates applicable to credit card loans.
Last January, the smart rate was 6.96%.
Thereafter, it gradually increased every month and reached 7.13% last May.
But in June and July, it decreased slightly to 7.10%.
However, it increased to 7.14% in August and reached 7.20% in September.
On the advice of the International Monetary Fund (IMF), Bangladesh Bank introduced the market-based interest regime.
The interest rate cap of 9% was imposed in April 2020 to facilitate traders.
A research report by the central bank also recommends withdrawing or increasing the interest-rate limit.
But Bangladesh Bank was silent as the government did not give positive consent.
One of the conditions of the IMF’s $4.7-billion loan is to make the interest rate market-based.
In the light of that condition, the new interest system was introduced.
