Bangladesh has reinstated a market-driven interest rate regime after a four-year hiatus, allowing banks to adjust lending rates based on demand. However, most banks are opting for a cautious approach, maintaining current lending rates for the time being.
Interest rates on consumer loans, forced loans, and overdue loans are expected to increase gradually in the coming months. Forced loans occur when customers fail to make letter of credit (LC) payments on time, while overdue loans result from delayed instalment payments.
The decision to scrap the SMART formula, which tied interest rates to Treasury bill rates, was made by the Bangladesh Bank less than a year after its introduction and the lifting of the 9 % lending rate cap. Prior to this, the maximum lending rate was 13.55 %, significantly higher than the previous ceiling.
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