B Mirror Report: Bangladesh Bank has introduced major changes to make long-term financing more affordable and attractive, reducing interest rates while increasing loan ceilings.

In a circular issued on Thursday (April 30) to the chief executives of scheduled banks, the central bank announced revisions to the Long-Term Financing Facility (BB-LTFF), effective from May 1.

Under the new policy, participating financial institutions (PFIs) will access funds at differentiated rates based on their CAMELS ratings. Banks with a rating of 1 will receive loans at 1% for five years, 1.25% for seven years, and 1.50% for ten years. For rating 2, the rates are 1.25%, 1.50%, and 1.75%, while for rating 3, they are set at 1.50%, 1.75%, and 2%, respectively.

At the client level, banks may set lending rates by considering their cost of funds and operational expenses. However, the final rate cannot exceed the cost of funds by more than 2 to 3 percentage points, allowing entrepreneurs to access long-term loans at lower costs.

The loan limits have also been revised. A single borrower can now receive up to $10 million from one bank, while the ceiling for syndicated financing has been raised to $20 million.

The central bank said the changes were made to align the facility with current market demand and financial conditions, making it more effective and user-friendly. The new policy will apply to both existing and new loans.

Previously, interest rates were based on SOFR, as per a circular issued on July 16, 2023. The new fixed-rate structure is expected to simplify the system and improve predictability.