Banks allowed to set their interest rates
From now on, banks will have the authority to determine their lending rates based on demand and supply dynamics, as outlined in a circular issued by the central bank on Wednesday (8 May).
Bangladesh Bank has discontinued the SMART lending rate mechanism, transferring the responsibility to individual banks.
From now on, banks will have the authority to determine their lending rates based on demand and supply dynamics, as outlined in a circular issued by the central bank on Wednesday (8 May).
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"To move towards a market-based interest rate, the existing reference rate SMART for determining the lending rates of banks/NBFIs is hereby abolished," the central bank said in a resolution after the third meeting of the Monetary Policy Committee on the day.
The central bank also said banks and NBFIs can set interest rates based on the interaction of demand and supply in the market as well as the banker-customer relationship.
According to bankers, this shift may favour top-rated banks, as they are likely to have lower costs of funds compared to relatively weaker banks.
"Also, we will be able to offer loans at competitive rates," said a deputy managing director of a leading private commercial bank.
