Regulatory Alerts2024-05-08
Added
Interest/Profit Rate of Loan/Investment
Bangladesh Bank withdraws the SMART-based interest rate system for bank loans, revoking BRPD Circular No. 09 and related circular letters, to transition to a full-fledged market-based interest rate system. Interest rates for bank loans will now be determined by the banker-customer relationship, considering the demand and supply of loanable funds. All Scheduled Banks in Bangladesh must declare sector-specific interest rates, allowing a 1% variation for individual customers, and specify interest rate terms in loan sanction letters, including any variable rate increase limits. A maximum penal interest of 1.5% may be charged on overdue amounts, and no service charges are allowed beyond the declared interest rate; these instructions are effective immediately and also apply to Islamic Sharia’h based banks for profit rate determination.