Banks asked not to charge higher interest rate

Bangladesh Bank on Sunday asked commercial banks not to charge higher interest rates for loans after the central bank had withdrawn ceiling on interest rate for all types of loans, except agriculture and pre-shipment export loans.

The central bank in a circular asked the banks to maintain a spread between average deposit rate and lending rate up to 5 for all types of loans, except the high-risk consumer loans, including credit card and SME loans.

‘The new directive means that if the average deposit rate of any bank stands at 9 per cent, the bank will not be able to charge more than 14 per cent interest on loans, except consumer and SME loans,’ said a BB official.

‘The cap on interest rate for agriculture loans remains at 13 per cent and pre-shipment export loans at 7 per cent,’ said the official.

The BB on January 5 withdrew cap on interest on all type of loans, except agriculture and pre-shipment exports.

The BB circular on Sunday said, ‘The business community has alleged that the banks are not exercising their freedom in setting interest rate on their own with prudence and rationally. And that is why banks are asked to maintain a spread between average deposit rate and lending rate up to lower single digit.