BRPD Circular No. 09: Interest/Profit Rate of Loan/Investment

Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh. Ref No.: BRPD-Reg-09 Banking Regulation and Policy Department June 19, 2023 BRPD Circular No.-09 Date: ------------------ 05 Ashar 1430 Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh. Dear Sir, Regarding the interest/profit rate of loans/investments. In order to maintain the momentum of the industrial and commercial sectors and to ensure efficient loan management, banks are required to follow the following guidelines to introduce a market-based interest rate system for distributed loans:

(a) A reference rate will be determined based on the market interest rate of 182-day Treasury Bills issued by Bangladesh Bank, which will be known as the Bangladesh Bank Prime Lending Rate (BBPLR). The Data Management Department will determine this BBPLR, which will be published on the Bangladesh Bank website on the first working day of every month;

(b) In determining the interest rate of loans, the interest rate must be determined by adding a maximum spread of 3% to the BBPLR;

(c) In determining the interest rate for agriculture and fisheries loans, the interest rate must be determined by adding a maximum spread of 2%;

(d) In the case of SME loans and personal loans (under consumer loans) and car purchase loans, an additional supervision charge of up to 1% over the aforementioned interest rate may be collected. The said supervision charge may be collected/levied once a year. No charge or interest shall be levied on this supervision charge imposed on a monthly basis in the form of compound interest. However, if any loan is consolidated in the middle of the accounting year, the supervision charge may be collected for the proportional time at the rate of 1%;

(e) The interest rate for the month to be determined must be determined based on the BBPLR of the immediately preceding month. For example, while determining the interest rate for March, the BBPLR determined for February must be considered;

(f) In determining the interest rate for loans provided under incentive packages/special funds established by the Bangladesh Bank or the Government, the guidelines formulated for the respective funds will apply. In addition, existing circulars/circular letters regarding credit cards will remain in force regarding the determination of credit card interest rates.

2. If there is a need to change the customer's loan installment due to a change in the interest rate in the aforementioned method, the customer must be informed in advance before the installment is re-determined.

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3. Banks operating on the basis of Islamic Shariah will determine the profit rate against investment by adding the spreads mentioned in clauses 1(b) and 1(c) to the BBPLR declared by the Data Management Department. In addition, they may collect the supervision charge mentioned in clause 1(d);

4. In accordance with the instructions of BRPD Circular No.-04 dated January 25, 2012, the details of the declared interest rate of the said month will remain uploaded to the Bangladesh Bank's Online Data Upload System (ODUS) through the Online Data Upload System (ODUS) by the 7th of the said month;

5. In the case of any new loan disbursement, the interest rate determined for the relevant month will be applicable. Whether the interest rate is fixed or variable, it must be determined with the consent of the borrower before the loan is disbursed. However, in the case of applying a variable interest rate, changes will be applicable every 06 months. For example, if a new loan is disbursed on January 01, 2024, the variable interest rate will be changeable on July 01, 2024.

6. In this context, all instructions of BRPD Circular No.-03 dated February 24, 2020, and BRPD Circular No.-08 dated April 22, 2021, regarding the interest rate of agriculture/fisheries loans, are hereby repealed.

7. This instruction will be effective from July 01, 2023.

8. This instruction is issued under the powers conferred by Section 29(2)(c) of the Bank Company Act, 1991.

Yours faithfully, (Md. Ali Akbar Farazi) Director (BRPD) Phone: 9530252