BB limits credit card interest rate at 20pc

Bangladesh Bank (BB) has set a ceiling of 20 percent interest on credit card bills to protect the interests of customers.

Bangladesh Bank issued the directive in a circular on Thursday (September 24). The directive will be effective from October 1.

The circular signed by Nazrul Islam, BB Banking Regulation and Policy Department (BRPD) General Manager, has been sent to the Managing Directors and CEOs of all scheduled banks operating in Bangladesh.

Referring to a circular issued on 11 May 2016 of the 'Guideline on Credit Card Operations of Banks', BB said, the interest or profit rate on credit cards shall not exceed 5% of the maximum interest or profit rate on other loans of the bank concerned. And the credit card interest or profit rate will only apply to unpaid arrears.

According to the central bank’s policy, a maximum of 50 percent of the credit card limit can be withdrawn in cash in advance. However, no unsolicited loan or any other benefit can be given to the customer as opposed to credit card.

In another decision BB said, interest or profit can be levied on the bill from the day after the last date fixed for payment of credit card bill. In this case, no interest can be charged from the date of the transaction in any way.

The circular also said, only one late delay fee (whatever the other name may be) may be levied against any late paid bill.

BB said it had noticed that in violation of the said guidelines, some banks are offering different types of cash withdrawals in different names as opposed to credit cards which are increasing the loan risk of the bank and imposing or charging unreasonably high interest at a flat rate on such loans.

This, BB observed, is harming the interest of the credit card holder customer.

In addition, some banks have been charging interest on unpaid credit card bills from the date of the transaction and charging late fees at a 'progressive rate' against unpaid bills.

In this situation, BB issued the directives to rationalize interest or profit with credit facility against credit card limit and to protect the interest of the credit card holder customers.

The circular also said that other guidelines on previously issued guidelines on credit card operations of banks would remain unchanged.

ask/zn