Bangladesh banks demand higher interest rates for FX trade finance

As per the central bank’s instruction of 2013, authorised dealers of banks are allowed to issue foreign currency loans against export and import bills also known as buyer’s credit and supplier’s credit at highest 6% interest inclusive of London Interbank Offered Rate (LIBOR). Officials of the scheduled banks at the meeting said that issuing foreign currency loans at the rate of 6% had become tough for the banks due to the significant rise in LIBOR.

Considering the situation, Bangladesh Bank should revise the cap on foreign currency loans against import and export bills upward, they said. Otherwise, banks might become reluctant in offering credit against import and export bills thus hindering overall trade financing, the banks’ officials cautioned.

Bangladesh Bank officials, at the meeting, said that the banks came up with the proposal when the government high ups had been giving utmost emphasise in bringing down interest rate for facilitating trade and investment. In line with the government’s focus, the central bank has been offering policy support to the banks for bringing down interest rate, they said. Bangladesh Bank, without giving any decision instantly, informed the banks’ officials that Bangladesh Bank would scrutinise the proposals.