The Bangladesh Bank (BB) on Thursday fixed the highest interest rate on spending through banks' credit cards to limit the exorbitant and unchecked rates charged by most banks.
Banks could not impose more than 20% interest on credit cards, according to a BB circular issued on the day. The instruction will be effective from October 1 this year.
Banks now cannot charge more than 5% interest on top of the highest interest rate for a consumer loan on expenditure through credit cards. The BB set the maximum threshold of interest rates on the payment tool for the first time in May 2017.
However, a large number of banks imposed as high as 27% interest on their credit cards bills in violation of BB regulations, it has been alleged.
The BB said interest would be imposed on unpaid bills from the immediate next day of the last date for payment of credit card bills. Banks could not impose interest from the date of transaction, the circular clarified.
Lenders cannot provide cash withdrawal facilities from credit cards in any name other than a maximum 50% cash withdrawal facility, as per the BB circular.
The BB said banks could charge late fees for only once against any late payment.
A good number of banks have been imposing higher rates of interest on their credit cards. They impose interest on progressive rates on unpaid bills from the date of transaction, violating the central bank’s regulations. Such behaviour had prompted the BB to issue the circular, said a high official of the BB.
Some banks had provided various cash withdrawal facilities in various names from their credit cards, which in turn had been increasing the credit risk of the banks, he added.
The country’s banks are often accused of various irregularities related to the operation of cards. The BB receives a huge number of complaints about card related irregularities from clients on a regular basis.
On April 15 this year, the BB asked banks not to charge any interest on credit card late fees from March 15 to May 31 this year due to the Covid-19 pandemic.
However, some banks used clever phraseology in their SMSs sent to customers in order to circumvent the instruction.
They informed clients that late fees would be waived but did not mention anything about other charges or fees incurred due to late credit card bill payments.
According to BB data, 35 out of a total of 60 banks are now operating credit card business in the country. The 35 banks had 15 lakh 56 thousand 448 credit cards till January this year.