BANGLADESH BANK issued a guideline on May 11 of this year to put a cap on credit card interest rate as the banks were charging unusually high interest rates ranging from 30 to 40 per cent along with hidden changes.
Bangladesh Bank in its guideline states that bank's credit card interest rates will actually be consumer loan interest rate plus 5.0 per cent. Since credit card business is based on collateral-free loan, which is insecure in nature and involves high risk and maintenance cost associated with it, commercial banks have been putting pressure on the central Bank to reconsider applying the cap on credit card interest rate which will hinder credit card business that is considered to be a booming business nowadays.
The rate of credit card interest is high around the world and reducing interest rate will have a negative impact on the banks' profitability. In these circumstances, Bangladesh Bank (BB) recently held a meeting with the officials of commercial banks and came up with fresh proposals regarding the interest rate. The central bank has now decided that interest rate of credit cards will be the highest rate of loan interest plus 5.0 per cent, that is the new interest rate would be 22-23 per cent which is justifiable.
Mohammad Zonaed Emran
Mutual Trust Bank Limited