Badrul Ahsan :
The Central Bank has finally given in to the pressure from commercial bankers to raise interest rate on credit card.
In a circular issued on Thursday, Bangladesh Bank revealed its guideline revising the earlier one with regard to such interest rate.
According to the revised guideline, the commercial banks will be allowed to charge the borrowers around 25 percent interest against their loan through credit cards where as the May 11 BB guideline allowed only 20 percent interest on such loans.
“The Central Bank relaxed the policy, bowing down to pressure from the ABB, a platform of top executives of the country’s commercial banks,” a high official of BB told The New Nation preferring anonymity.
On June 19, a delegation of Association of Bankers, Bangladesh (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 May 11 guidelines were not revised.
Commenting on the earlier BB policy on credit card lending rate, the Eastern Bank MD Ali Reza Iftekhar said, “Banks could charge maximum 20 percent 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. The new decision would also hit card business.
‘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 which push their operating costs. It should come into account while taking any new decision,’ the bank’s Managing Director elaborated while talking to this correspondent.
The banks will be able to increase the interest rate on credit card up to five percentage points as per the BB’s guidelines revised in line with their demand, he said.
However, card users expressed their dismay over the new decision of the Central Bank saying the BB finally surrendered to the private bankers.
“Charges finally goes more than 40 percent as the banks charged service charges and others while issuing a card along with the fixed interest. So, the new decision will undoubtedly a surrender to the private operators,” Tania Tabassum, a private job holder, said.
“Commercial Banks are now charging around 9 percent against loans. If they can make profit with this interest rate then why will they incur losses if charge around 20 percent against credit cards?” she questioned.
“It is really surprising that the Central Bank finally has given in to the bank’d demand,” Tahir Patwary, another card user, said.
The BB in its circular, however, said that the relaxed guidelines would come into effect from January 1, 2018.
Many banks are charging 30 percent to 36 percent rate of interest on credit cards while they are imposing 9 percent to 10 percent rate of interest on their other consumer loan products, Patwary 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.
The Central Bank has finally given in to the pressure from commercial bankers to raise interest rate on credit card.
In a circular issued on Thursday, Bangladesh Bank revealed its guideline revising the earlier one with regard to such interest rate.
According to the revised guideline, the commercial banks will be allowed to charge the borrowers around 25 percent interest against their loan through credit cards where as the May 11 BB guideline allowed only 20 percent interest on such loans.
“The Central Bank relaxed the policy, bowing down to pressure from the ABB, a platform of top executives of the country’s commercial banks,” a high official of BB told The New Nation preferring anonymity.
On June 19, a delegation of Association of Bankers, Bangladesh (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 May 11 guidelines were not revised.
Commenting on the earlier BB policy on credit card lending rate, the Eastern Bank MD Ali Reza Iftekhar said, “Banks could charge maximum 20 percent 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. The new decision would also hit card business.
‘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 which push their operating costs. It should come into account while taking any new decision,’ the bank’s Managing Director elaborated while talking to this correspondent.
The banks will be able to increase the interest rate on credit card up to five percentage points as per the BB’s guidelines revised in line with their demand, he said.
However, card users expressed their dismay over the new decision of the Central Bank saying the BB finally surrendered to the private bankers.
“Charges finally goes more than 40 percent as the banks charged service charges and others while issuing a card along with the fixed interest. So, the new decision will undoubtedly a surrender to the private operators,” Tania Tabassum, a private job holder, said.
“Commercial Banks are now charging around 9 percent against loans. If they can make profit with this interest rate then why will they incur losses if charge around 20 percent against credit cards?” she questioned.
“It is really surprising that the Central Bank finally has given in to the bank’d demand,” Tahir Patwary, another card user, said.
The BB in its circular, however, said that the relaxed guidelines would come into effect from January 1, 2018.
Many banks are charging 30 percent to 36 percent rate of interest on credit cards while they are imposing 9 percent to 10 percent rate of interest on their other consumer loan products, Patwary 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.
