Bangladesh Bank cuts interest rate on exporters’ borrowing from EDF

The central bank has slashed the interest rate on loans from its Export Development Fund or EDF by 1 percentage point to boost exports.

From now, the EDF interest rate would be the six-month dollar Libor plus 1.5 percent, Bangladesh Bank said in a notice on Tuesday. The rate was previously 2.5 percent more than the Libor.

The Libor or the London interbank offered rate is what the banks charge each other for short-term loans in the London Interbank Market. It serves as a global benchmark for the banks for short-term interest rates.

The latest interest rate on EDF will remain effective until June 30, according to the circular.

Banks will get funds from the central bank at the six-month dollar Libor + 0.5%, compared to 1% earlier, to disburse among manufacturers  

On Feb 27, the BB increased the size of the fund to $3.5 billion from $3 billion to help exporters.

The EDF was introduced by the central bank in 1988 with a capacity of $30 million, which was increased in phases.

Members of Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Textile Mills Association can take loans up to $25 million.

The loan window is also available for several other sectors, such as leather and leather products, ceramics and pharmaceuticals.