BRPD Circular Letter No. 14: Clarification on BRPD Circular Letter No. 13/2015 regarding rationalization of rate of interest on deposit and lending

Ref No.: BRPD/RegPol/2015-16/135/113 Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. December 28, 2015 Poush 14, 1422

BRPD Circular Letter No. 14 Date: -------------------

To, The Managing Director / Chief Executive All Scheduled Banks operating in Bangladesh.

Dear Sir,

Context: Clarification on BRPD Circular Letter No. 13/2015 issued regarding rationalization of rate of interest on deposit and lending.

Reference is drawn to your attention to BRPD Circular Letter No. 13 issued on November 19, 2015.

Through the aforementioned Circular Letter, considering the important role of the SME sector in the economic development of the country, instructions were given to you to limit the spread, i.e., the difference between the weighted average interest rate on loans and deposits in sectors other than credit cards and consumer loans, to less than one digit (i.e., less than 10%). However, it has come to our notice that there is some ambiguity among borrowers and bankers regarding what rate is meant by the phrase "less than one digit (i.e., less than 10%)" mentioned in the said Circular Letter.

In this regard, it is informed that the phrase "less than one digit (i.e., less than 10%)" mentioned in BRPD Circular Letter No. 13/2015 means "less than 5%", i.e., the spread, i.e., the difference between the weighted average interest rate on loans and deposits in sectors other than credit cards and consumer loans, must be limited within 5%.

Yours faithfully,

(Rup Ratan Pinn) Deputy General Manager Phone: 9530336