Bangladesh last week reinstated a market-driven interest rate regime after four years, allowing banks to put interest rates on loans as per the demand.
However, most banks are taking it easy on re-fixing lending rates upwards, while sources say they will continue to offer funds under the current rates.
The interest rates on consumer loans, forced loans and overdue loans are likely to go up rapidly in the upcoming months, however.
Forced loans are created when customers fail to make their LC (letter of credit) payments on maturity, and yet banks have to honour their obligations to foreign banks.
When borrowers fail to clear installments on time, the loan is categorized as overdue.
Last week, the Bangladesh Bank scrapped the Six-month Moving Average Rate of Treasury bills (Smart) formula to make interest rates fully market-based, less than a year after the Smart was introduced and the 9% lending rate cap lifted.
Even before the Smart formula was abolished, the maximum lending rate was 13.55%, much higher than the ceiling that existed for more than three years.
Thus, most of the banks want to continue the current lending rates and plan to revise them after assessing the situation since a sharp rise in the cost of funds may make existing borrowers unable to pay back while the demand for fresh loans may fall.
Last week, the central bank took three major decisions in line with the International Monetary Fund (IMF) prescription as it announced the market-driven interest rate and a flexible exchange rate and raised the policy rate to tame higher consumer prices.
Experts criticized the banking regulator, saying the decisions should have been initiated earlier since inflation has stayed above 9% for the past 20 months.
They said that the interest rate cap and the subsequent Smart formula made the banking sector volatile.
As per the new exchange rate-setting system known as the crawling peg, banks are permitted to determine the price of the US dollar by considering Tk117 as the mid-rate.
Most banks on Sunday charged Tk117.50 per dollar officially while opening LCs.