The Bangladesh Bank has introduced significant revisions to its long-term financing framework, offering what it describes as a more flexible and cost-effective credit structure for industrial entrepreneurs. The move is aimed at accelerating growth in the country’s productive sectors and encouraging greater long-term investment through its Bangladesh Bank Long-Term Financing Facility (BB-LTFF).
In a circular issued on Thursday (30 April) and circulated to all chief executives of scheduled banks, the central bank outlined a revised interest rate structure linked to the CAMELS rating of participating banks and financial institutions (PFIs). The CAMELS framework assesses financial soundness based on capital adequacy, asset quality, management, earnings, liquidity and sensitivity.
Under the new structure, banks will access funds at differentiated rates depending on their rating category and loan tenure.
Revised BB-LTFF interest structure
| CAMELS Rating |
5-Year Tenor |
7-Year Tenor |
10-Year Tenor |
| Rating 1 |
1.00% |
1.25% |
1.50% |
| Rating 2 |
1.25% |
1.50% |
1.75% |
| Rating 3 |
1.50% |
1.75% |
2.00% |
The central bank has also revised the pricing mechanism compared with its earlier circular issued on 16 July 2023. At that time, lending rates were benchmarked against SOFR (Secured Overnight Financing Rate) plus a spread. For instance, top-rated banks (Rating 1) were charged SOFR + 0.25% for five-year facilities, while longer tenors carried progressively higher spreads up to SOFR + 0.75%.
Previous vs revised framework (overview)
| Rating |
Earlier 5-Year Rate |
Earlier 7-Year Rate |
Earlier 10-Year Rate |
Current 10-Year Rate |
| 1 |
SOFR + 0.25% |
SOFR + 0.50% |
SOFR + 0.75% |
1.50% |
| 2 |
SOFR + 0.50% |
SOFR + 0.75% |
SOFR + 1.00% |
1.75% |
| 3 |
SOFR + 0.75% |
SOFR + 1.00% |
SOFR + 1.25% |
2.00% |
According to Bangladesh Bank, the revised structure allows financial institutions to determine lending rates to end borrowers by factoring in their own cost of funds and operational expenses. However, the final lending rate must not exceed the cost of funds by more than 2 to 3 percentage points. Previously, PFIs were permitted to add a margin of 1 to 2 percentage points over funding costs.
In addition, the central bank has introduced clearer borrowing limits. A single borrower may now obtain up to USD 10 million through a single bank under the facility, while syndicated financing arrangements involving multiple banks may extend up to USD 20 million.
The central bank stated that the reforms are designed to make the facility more attractive and better aligned with current market conditions and financial realities. The updated rules and interest structures will come into effect from 1 May and will apply to both existing and new loans under the BB-LTFF scheme.
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