The Bangladesh Bank has taken decisive action to support export-oriented companies in the face of the ongoing global economic crisis. 

In a recent circular, the central bank urged banks to align the interest rate of pre-shipment loans with the new reference lending rate, aiming to create a more market-based approach.

By linking pre-shipment loan interest rates to the reference lending rate, also known as the SMART (six-month moving average rate of Treasury bill), the central bank hopes to enhance the resilience of export-focused businesses against economic shocks. This move is expected to foster an environment where these companies can flourish and ensure more effective credit management within the banking sector.

Under the new guidelines, banks must add a maximum margin of 2% to the reference lending rate when determining the interest rate for pre-shipment export credits. This adjustment is designed to strike a balance that benefits both exporters and financial institutions.

The Pre-shipment credit serves as a crucial financial tool for exporters, offering funding for various stages of the export process, including purchasing, processing, manufacturing, or packing goods before shipment.

This initiative follows the introduction of the market-driven lending rate by the Bangladesh Bank for banks and non-banking financial institutions in June. 

The market-driven approach replaced the previous 9% lending rate cap, which had been in effect since April 2020.

The circular outlines a penalty interest of up to 1.5% on the entire outstanding amount of a working capital loan or overdue installments of a demand loan if installments are categorized as overdue.

This latest measure from the central bank seeks to boost the export sector and establish a more flexible and resilient financial landscape amid the ongoing global economic challenges.