Bangladesh Bank on Thursday raised the lending rate of banks by 50 basis points to 10.70% for October to control inflation.
The central bank issued a circular through its banking regulations and policy department.
The central bank's spokesperson Md Mezbaul Haque said that banks could now add 3.50% with the reference lending rate, known as Smart rate, of 7.20%.
Banks can currently add 3% with the Smart rate, measured by six months moving average rate of treasury bills.
For pre-shipment export loans, banks can add 2.5% with Smart, which was 2% earlier.
The loan interest rate for the agriculture sector remains unchanged.
In the monetary policy for July-December period, the Bangladesh Bank introduced Smart to fix the lending rate.
The policy said banks can add a maximum 3% and non-bank financial institutions (NBFIs) a maximum 5% with the Smart to fix the lending rate.
In July, the Smart was 7.10%, however it has also increased by 10 basis points in two months.
The step of increasing lending rate will make the loans costlier, which may decrease the loan demand.
The Bangladesh Bank increased the policy rate by 75 basis points to 7.25% on Wednesday, which was 6.50% in the previous hike.
The hike is the decade's highest increase in a single day. It was raised a second time in three months and sixth since May last year when inflation just shot over 8% from below 6% in January 2022.