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Bangladesh Bank on Wednesday increased the ceiling of the rate at which Bangladeshis could secure finances from external sources through local banks.
The move comes after the benchmark rate hikes by the United States made it difficult for them to access finances.
On August 16, the central bank set the all-in-cost ceiling per annum with a markup of 3% over the benchmark rate applicable to the relevant currency against short-term trade finance, a decrease of 50 basis points from 3.5% previously.
Rising interest rates shrink global liquidity.
For businesses, a tighter credit environment results in higher borrowing costs. Monetary tightening in the US has led to investors pulling out their money out of Asian economies, according to the Asian Development Bank.
Given the global market trends, it has been decided to set the all-in-cost ceiling per annum at SOFR + 3.50% for short-term trade finance in foreign exchange, said the central bank in a notice on the day.
All-in costs comprise the entire cost of a financial transaction or business operation, including all taxes and fees such as closing costs, origination fees, or commissions.
The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that is replacing the London Interbank Offered Rate.
(DT)
