Dhaka, Bangladesh (BBN)- The amount of buyers' credit in the country's banking sector increased 14.05 per cent in January last as importers got higher amount of the same taking the advantage of lower interest rates.
The size of the credit, channelised through Usance Payable At Sight, generally known as 'UPAS', was US$1.06 billion in January. It was $934.37 million in the previous month, according to the central bank statistics.
However, the repayment of loans by importers also increased by 16.71 per cent to $1.02 billion in January last from $934.37 million a month ago.
The net outstanding buyers' credit rose to $5.41 billion in January 2017 from $5.35 billion a month ago, the official data showed.
Such loans are received in foreign currency from overseas sources on the basis of local bank guarantees mostly at an interest rate ranging between 3.50 per cent and 6.00 per cent.
Businessmen are now allowed to avail buyers' credit to import capital machinery and industrial raw materials.
Talking to BBN, a senior official of the Bangladesh Bank (BB) said the foreign currency loans have become popular gradually mainly due to lower interest rates offered by local banks or overseas sources.
The central banker, however, said the effective interest rate of the buyers' credit will increase if the local currency, Bangladesh Taka (BDT), depreciates against the US dollar (US$).
The exchange rate of local currency depreciated 1.47 per cent against the US dollar in last five months due to higher demand for the greenback in the market.
Earlier on October 27 last, the BDT witnessed a depreciating trend against the US dollar after maintaining stability for more than seven months in the inter-bank forex market.
The US dollar was quoted at BDT 79.56-BDT 79.57 in the inter-bank forex market on Thursday against BDT 78.40-BDT 78.42 on October 27 last, according to market operators.
Earlier on March 13 of last calendar year, the US dollar was quoted at BDT 78.40.
Such depreciating mode of BDT against the US dollar may continue in the coming days due to higher demand for the greenback in the market for settlement of import payment obligations, according to a senior treasury official of a leading commercial bank.
The central bank of Bangladesh had opened up the opportunity for taking foreign currency loans in February 2012, with importers making its best use.
BBN/SSR/AD