Dhaka, Bangladesh (BBN) - Interest rate on loans under the Export Development Fund (SDF) is set to hike as the lending rate will be fixed in line with Secured Overnight Financing Rate (SOFR).
From now on, this interest rate will be determined on the basis of SOFR, according to a notification, issued by the Bangladesh Bank on Monday.
Under the new arrangement, authorised dealer banks will be able to borrow from the EDF at SOFR plus 0.5 per cent interest per annum. Banks will be able to collect SOFR plus 1.50 per cent interest from exporters at the customer level.
This method of setting interest rates has been adopted in line with global financial market trends. Every business day, the Federal Reserve Bank of New York publishes the SOFR at 8:00am local time.
The SOFR was 5.33 per cent on Monday, according to data from the Federal Reserve Bank of New York.
Earlier, the central bank had set the benchmark for fixing the interest rate on EDF loans.
The central bank used to collect 3.0 per cent interest from the authorised dealer banks for the money disbursed from the EDF. Dealer banks used to provide loans to exporters in US dollars, charging maximum 4.50 per cent interest.
The size of EDF, which aims to boost exports, was once raised to $7.0 billion. But later the size of this fund was limited amid the severe dollar-crisis. Currently, the size of EDF stands at $2.5 billion at the end of August.
BBN/SSR/AD