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EBL and Pran Pioneer Bangladesh’s First IRS Deal

Industry: Bank, Financial
Company: Eastern Bank Limited (EBL)
Company Intelligence Tag: Partnership Insights

Eastern Bank Ltd (EBL) and Pran Agro Ltd have recently executed Bangladesh’s inaugural local currency interest rate swap (IRS) deal, marking a significant stride in managing interest rate volatility. In this groundbreaking agreement, EBL commits to paying Pran Agro a fixed 7 percent interest rate, while Pran Agro will reciprocate based on the prevailing interbank repo (IBR) rate each quarter over a year. This financial instrument allows both entities to mitigate potential risks arising from fluctuations in interest rates. Notably, the IBR rate, averaged at 6.37 percent during the first quarter, will determine Pran Agro’s gains or losses, creating a dynamic scenario where profits surge if the IBR remains below 7 percent and losses incur if it consistently exceeds 7 percent. The successful local management of risk through this instrument marks a significant milestone, with regulatory efforts spanning from November 2021 to the eventual approval in February this year. This pioneering effort underscores the potential of interest rate swaps to fortify economic growth and financial resilience, bringing Bangladesh, now a $460 billion economy, into the realm of a burgeoning swaps industry.

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