UNB, Dhaka

Bangladesh Bank has increased interest rates on loans from the Export Development Fund (EDF) to discourage unnecessary lending from the fund, which is fed from the country’s foreign exchange reserves.

The EDF is the Bangladesh Bank’s fund to assist the export sector deal with its requirement of foreign currency from time to time. Now exporters will have to pay about 7% interest to borrow from this fund. Previously, the interest rate was 4.5%. BB’s Foreign Exchange and Policy Department issued a circular in this regard on Sunday.

As per the new guidelines, EDF interest will be determined by adding 1.5% as a margin to the Secured Overnight Financing Rate (SOFR).

At present, the interest rate in the SOFR system is 5.39%. If 1.5% is added to that, the interest rate stands at 6.89%. The previous rate of interest was 4.5%. Accordingly, the interest rate increased by 2.39%.

According to the circular, from February 2023, the BB has been bringing 3% secured charges from authorised dealers (ADs) of commercial banks. And the AD banks were collecting interest at the rate of 4.5% from the customers.

But now an AD, under the new rules, will collect 1.5% interest with SOFR rate and an additional 1.5% SOFR rate from the customer. However, since the SOFR rate is variable, the EDF loan will depend on the bank-customer relationship.