Interest rate on long-term loans down 0.5pc
Bangladesh Bank has reduced the rate of interest on long-term industrial loans in foreign currency by 0.5 percentage points due to a rise in London Inter-Bank Offered Rate (LIBOR).
From now on, the rate of interest on loans under long-term financing facility will be LIBOR plus 2 percent to 3 percent against the existing rate of LIBOR plus 2.5 percent to 3.5 percent, as per a notice from the central bank yesterday.
In the last one year, the LIBOR rate rose more than 0.5 percentage points. For instance, yesterday the 6-month LIBOR rate was 1.575 percent, which was 1.058 percent on an average a year back.
The World Bank last year provided $291 million to Bangladesh to extend long-term foreign currency credit to private sector firms. Subsequently, the government created a fund using the WB loan for disbursement through a select few commercial banks.
Banks are providing industrial loans at a maximum cost of 4 percent -- which is less than half the going interest rates.
LIBOR is the rate at that banks charge each other for short-term loans in the London interbank market. It also serves as a global benchmark for short-term interest rates. The LIBOR will be followed because the loans will be given in foreign currency.
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