Foreign trade financing to get cheaper as BB caps charges
Banks from now on cannot charge more than the applicable benchmark rate, such as SOFR for US dollar-denominated financing or Euribor for euro transactions, plus 3% annually as the 'all-in-cost' for short-term trade finance in foreign currency
Highlights:
- Bangladesh Bank caps trade finance cost at benchmark rate plus 3%
- Ceiling applies to import finance, export bill discounting and advance export payments
- All-in-cost includes interest, fees, commissions and other charges
- New rule effective from 11 May, replacing August 2025 ceiling
- Move aims to align with global standards and curb excessive bank markups
Bangladesh Bank has capped the interest and fees banks can charge on foreign currency trade financing at a maximum of 3 percentage points above internationally recognised benchmark rates, in a move aimed at easing costs for importers and exporters amid high global interest rates.
The central bank issued a circular in this regard yesterday (10 May).
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According to the circular, banks from now on cannot charge more than the applicable benchmark rate, such as the Secured Overnight Financing Rate (SOFR) for US dollar-denominated financing or Euribor for euro transactions, plus 3% annually as the "all-in-cost" for short-term trade finance in foreign currency.
The new rule takes immediate effect from today (11 May).
The ceiling applies to three categories of foreign trade financing: short-term import trade finance, discounting of usance export bills, and advance payments against exports under open account transactions.
The "all-in-cost" includes interest, commissions, fees and other charges associated with such financing.
For example, if the (SOFR) for the US dollar stands at around 4.5%, banks will now be allowed to charge a maximum of around 7.5% annually for eligible trade finance facilities.
The latest instruction has replaced an earlier ceiling set by Bangladesh Bank in August 2025.
Bangladesh Bank officials said the revised framework aims to align Bangladesh's trade financing practices more closely with international market standards while preventing excessive markups by banks.
The measure is expected to benefit importers managing rising input costs as well as exporters seeking cheaper access to pre-shipment and post-shipment foreign currency financing.
Bangladesh Bank officials said the ceiling would also help ensure competitive pricing in trade finance and reduce the risk of businesses facing unusually high borrowing costs due to fluctuating global rates.
