Bank lending rate slightly increased in October

Bank lending rate has slightly increased for October compared to September.

According to the latest Bangladesh Bank data, 6-month Moving Average Rate of Treasury bills (SMART) went up by 0.06 per cent to 7.20 per cent for October.

After lifting the interest rate cap in July, the central bank set new interest rate calculation methods, which is known as the SMART rate.

By this new calculation method, banks can add 3 per cent additional margins with the SMART rate and non-bank financial institutions (NBFIs) can add 5 per cent. So the bank lending rate will be applicable at 10.20 per cent from October 1.

Experts have said that the interest rate hike could not tame ongoing high inflation. Bankers are also not happy with the new rate because banks’ deposit rates are increasing due to high inflation and liquidity shortages.

They opined that interest rates should have been made market dependent. "However, the government is buying the treasury bills, so there is a sort of behind-the-scenes control of this new rate. The bankers are not happy about it.”

Financial sector experts said the country needs to focus more on controlling food inflation than raising interest rates because such inflation is increasing due to supply-side disruptions. The government should take initiatives to stop the arbitrariness that the businessmen are doing at various times, they added.

In August, point to point inflation rate was 9.92 per cent, which was high from the recently bankrupt Sri Lanka.