BB caps trade finance charges to cut borrowing costs

File photo of Bangladesh Bank

Bangladesh Bank has introduced a cap on interest rates and related charges for foreign currency trade financing, aiming to reduce borrowing costs for importers and exporters amid elevated global interest rates.

In a circular issued on Saturday, the central bank said banks will no longer be allowed to charge more than 3 percentage points above internationally recognised benchmark rates for short-term foreign trade financing.

Under the new guideline, the maximum “all-in-cost” for financing in US dollars will be calculated based on the Secured Overnight Financing Rate (SOFR) plus an additional 3 percent annually. For euro-denominated transactions, the benchmark will be Euribor plus the same margin.

The directive came into effect on May 11 and applies to short-term import trade finance, discounting of usance export bills, and advance payments against exports under open account transactions.

According to the circular, the “all-in-cost” includes interest rates, commissions, fees, and other related charges imposed by banks on trade financing facilities.

For instance, if the SOFR rate stands at around 4.5 percent, banks will now be permitted to charge a maximum of approximately 7.5 percent annually on eligible financing arrangements.

The new framework replaces an earlier ceiling introduced by the central bank in August 2025.

Officials said the move is intended to bring Bangladesh’s trade financing system closer to international market practices while preventing excessive charges by banks. The measure is also expected to help businesses cope with rising import costs and provide exporters with cheaper access to foreign currency financing for pre-shipment and post-shipment activities.

The central bank believes the revised ceiling will promote fair competition in trade finance and protect businesses from unusually high borrowing costs caused by fluctuations in global interest rates.