Bangladesh Bank Orders Banks to Cap Credit Card Interest

Banks are charging customers between 25 and 27 percent in interest on credit card debt, in violation of regulations, Bangladesh Bank said.

Bangladesh Bank has imposed a new 20 percent cap on credit card interest.

Under previous guidance, banks were supposed to cap interest charged on credit cards at 5 percent higher than the highest interest rate charged on other loan products.

In April, Bangladesh Bank imposed a 9 percent ceiling on interest rates on loan products, but has found that many banks are still charging customers between 25 and 27 percent in interest on credit card debt, in violation of regulations.

As such, the central bank has imposed a 20 percent interest rate cap on credit cards.

Bangladesh bank also said banks can only charge interest on loans taken against a credit card after the repayment deadline (not from the transaction date), and they may charge a fee only one time for any late payment.

Banks are also be prohibited from allowing cash withdrawals more than 50 percent of the allowable credit limit on a credit card. Banks have been ignoring this ceiling, thus widening their own credit risks, Bangladesh Bank said.

Lenders are instructed to follow the 50 per cent cash withdrawal ceiling.

The new directions take effect from 1 October.