Staff Correspondent

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 central 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 percent interest to borrow from this fund. Previously the interest rate was 4.5 percent.

Bangladesh Bank’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 percent as a margin to the Secured Overnight Financing Rate (SOFR).

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

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

But now an AD, under the new rules, will collect 1.5 percent interest with SOFR rate and an additional 1.50 percent SOFR rate from the customer. However, since the SOFR rate is variable, the EDF loan will depend on the bank-customer relationship.