Bangladesh Bank on Thursday relaxed its guidelines on banks’ credit card operations, allowing the commercial banks to set around 25 per cent interest rate on loans they (banks) disburse through credit cards.
The central bank relaxed the policy, bowing down to pressure from the Association of Bankers, Bangladesh, a platform of top executives of the country’s commercial banks.
The BB issued a circular to the managing directors and chief executive officers of all banks saying that from now on the banks would be allowed to set as base rate the highest interest rate of any credit product instead of consumer loans while setting interest rate for credit card loans.
The BB in its guidelines issued on May 11 asked the banks not to impose rate of interest on credit card loans more than five percentage points higher than the highest rate of interest they (banks) offer for other consumer loans.
But, the revised guidelines said that the interest rate on the outstanding amount of credit card would not exceed 5 percentage points of the highest interest rate offered in any credits of the respective bank.
On June 19, a delegation of the ABB at a meeting with BB governor Fazle Kabir requested the central bank to set as base rate the highest interest rate of any credit product instead of consumer loans while setting interest rate for credit card loans.
The delegation argued that the banks would face difficulties in operating credit card products if the latest guidelines were not revised.
‘Banks can charge maximum 20 per cent interest on the cardholders in line with the guidelines issued on May 11, but they have to bear operating cost of at least eight per cent against the loans disbursed through the credit cards,’ Eastern Bank managing director Ali Reza Iftekhar told reporters after the June 19 meeting.
‘We have to run call centres and receive the international calls while operating the credit card products. Besides, the banks also offer different types of incentives to the clients time to time,’ he said.
‘The banks will be able to increase the interest rate on credit card up to five percentage points if the central bank revises the guidelines in accordance with their demand,’ he said.
The central bank in its circular also said that the relaxed guidelines would come into effect from January 1, 2018 in line with the ABB’s demand.
Many banks are charging 30 per cent to 36 per cent rate of interest on credit cards while they are imposing 9 per cent to 10 per cent rate of interest on their other consumer loan products, he said.
If a due date falls on a Friday, Saturday or any other public and bank holidays declared by the government and the BB at the beginning of each year, the card issuers will have to be allowed the grace period (holiday) as required for payment to be made on the next working day, the central bank circular said.
A PIN code or biometric safety measure will have to be ensured at every point of sales (POS) outlets for credit card security, the BB said.
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