Bangladesh Bank (BB) has announced an increase in the interest rate on credit cards, setting a new cap of 25 per cent effective January 1, 2025. This is an increase from the previous limit of 20 per cent.
Under the new directive, banks will begin charging interest on credit card balances only after the designated repayment period has expired.
The Banking Regulation and Policy Division of Bangladesh Bank issued a circular on December 1, outlining the new interest rate policy. The central bank emphasized the importance of maintaining reasonable interest rates on credit card services while protecting consumer interests.
In the circular, the BB stated its intention to establish a maximum credit card interest rate of 20 per cent to ensure fair access to credit against card limits and protect customer interests. However, to enhance effective risk management and to align with the growing cost of funds for banks, the maximum rate was adjusted to 25 per cent.
Banks are required to determine the interest rates on credit cards based on demand for loans and the supply of lendable funds within this new cap. Furthermore, the directive asserts that Islamic Shariah-based banks must adhere to these guidelines in determining their profit margins on provided investments.
Additionally, the directive indicates that other regulations will remain unchanged, and it is issued under the authority granted by sections 29(2)(c) and 45 of the Bank Companies Act, 1991.
Currently, banks in Bangladesh offer a repayment period of up to 45 days on loans, with a maximum cash withdrawal limit of 50 per cent against credit card limits.
Credit card statements are generated on a specific date each month, aligned with the card's issuance date. Between statement generations, cardholders can benefit from an interest-free period of approximately 50 days, depending on the bank, as long as they clear the dues before the next statement due date.
