Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has imposed cap on lending rate for financing onion import until December 30 this year to ensure smooth supply of the item to the local market.
The banks have been asked to keep the lending rate on onion import financing at maximum 11 per cent, according to a directive, issued by the Bangladesh Bank (BB) on Thursday.
“We’ve taken the measures temporally aiming to ease the price of essential in the market,” a BB senior official told BBN in Dhaka.
The banks have also been asked to keep letter of credit (LC) margin at minimum level in this connection, the directive added.
The central bank has taken the decision against the backdrop of sudden rise of onion price in the market after India raised the minimum export price of the key cooking ingredient by $275 per ton.
Currently, imported onion is being sold at BDT 75-85 a kg, up from BDT 55-60 a week ago, local traders told the BBN.
The local variety of onion was sold at BDT 85-90 a kg from BDT 55-60 last week.
In the last one month, the price of imported onion went up 113 per cent and the local variety 94 per cent, the state-run Trading Corporation of Bangladesh (TCB) said.
The central bank earlier withdrew the cap on lending rate for all sectors and items barring only two — agriculture and export – to facilitate the country’s overall economic growth through boosting investment in different fields.
“The banks are now free to fix their lending rates with few exceptions only,” another central banker explained earlier.
In 1989, the BB introduced a flexible interest rate regime through issuance of a circular in line with the Financial Sector Reforms Programme (FSRP).
Under the FSRP, the banks are free to charge or fix their deposit and lending rates excepting the rate of interest on export credits.
BBN/SSR/AD