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Dhaka Tribune

Bangladesh Bank cuts cost ceiling for trade financing

The move came to discourage foreign currency lending to local clients

Update : 17 Aug 2022, 06:03 PM

Bangladesh Bank, in a circular on Tuesday, reduced the "all-in-cost" ceiling for short-term trade financing.

The move came to discourage foreign currency lending to local clients.

The term all-in-cost stands for the entire cost of a financial transaction or business operation, including all taxes and fees such as closing costs, originating fees, or commissions.

The central bank set the ceiling at 3%, according to the circular. It was earlier higher and had many slabs.

Traders usually borrow foreign currency from the banks to procure goods from abroad. It is considered to be good news for the clients or borrowers, but the banks are less likely to be interested in arranging such loans.

According to the circular, it has been decided to set the ceiling per annum with a mark-up of 3.% over the benchmark rate applicable to the relevant currency against short-term trade financing, given the global market trends.

As usual, the banks may continue to arrange finance with the London Interbank Offered Rate (Libor) as the benchmark rate until its usability is ceased, it added.

The Bangladesh Bank circular, signed by foreign exchange policy department director Md Sarwar Hossain, said that all other applicable instructions in this regard will remain unchanged.


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