Globally, lenders, including banks and other financial institutions, use Libor as a benchmark reference for determining interest rates for various debt instruments, including trade financing. The draft, issued via a notice last week, focused on short-term trade financing for which presently six-month Libor plus 3.50 per cent per annum can be applied. Apart from Libor, the notice allowed a benchmark rate in the currency of financing with prescribed mark up for discounting or early payment of export bills. It also allowed Islamic Shariah-based benchmark rate for Shariah-based finance. It is expected that from 2022 onwards, all new loans and LCs will be priced differently in addition to carrying out entire outstanding loans and LCs on a new reference rate.

Source: Dhaka Tribune December 27, 2020 19:41 UTC