Bangladesh Bank has asked all the scheduled banks to bring down their interest rate on SME loans to single digit, except loans against credit card and consumer loans.
The banks have also been asked to reduce the spread between deposit and lending rates, according to a circular Bangladesh Bank issued yesterday.
The instruction takes immediate effect.
Currently, the spread of SME loans remains at a double digit due to higher lending rate. BRAC Bank runs with a double digit spread as it deals with micro-finance.
Till last April, BRAC Bank kept the spread rate at 10% which has come down to single digit in recent months with the effort of Bangladesh Bank.
Among the banks, BRAC Bank charges highest 24% interest rate on SME loan, according to the Bangladesh Bank data.
While the average lending rate in the market is 11.48% as of September. Most banks lend SME loans at above 15%.
The banks have also been asked not to show other loans as SME loans, according to the circular. Earlier, there was no bar to lending rate on SME loans.
The banks charge higher interest rate on SME loans to absorb higher risk, said Mohammed Nurul Amin, managing director of Meghna Bank.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) on Wednesday demanded 9% interest rate on SME loans.
Bank loans remain the major barrier to the SME sector, said Abdul Matlub Ahmad, president of the FBCCI while addressing a seminar on the problems and prospects of the SME sector held on November 18 at the FBCCI auditorium in Dhaka.
There are many financial institutions that are willing to give SME credit, but the rate is the problem, he added.
He recommended keeping the deposit rate at 5%-6% but bringing down the interest rate for SMEs to 9%.
