Penalty interest back on overdue and classified loans
Interest rate on pre-shipment export credit will be 9.10%
Banks can now charge a maximum 1.5% penalty interest for overdue and classified loans.
Besides, the interest rate on pre-shipment export credit – which an exporter can access before sending goods to a buyer – has been aligned with the Six Months Moving Average Rate of 182 days Treasury Bill (SMART).
As per the new guidelines, the interest rate on pre-shipment export loans will be 9.10%, which was 10.10%.
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The Banking Regulation and Policy Department (BRPD) of the central bank issued a circular in this regard on Thursday.
Central bank officials said banks requested the central bank to reinstate the penalty interest against defaulted loans to encourage good borrowers and discourage bad ones or willful defaulters.
A senior official of the central bank told TBS, "We noticed that without penalty interest on overdue loans, customers tend to make instalments just before the loan classification date. This leads to a decrease in the interest earned by banks during the overdue period (six months). To encourage regular payments, penalty interest has been reintroduced," he said.
Mentioning that this penalty can also be imposed on classified loans, the official said, banks can impose penalty interest on all types of classified loans if they want.
As per the circular, for any overdue loan or instalment, a maximum penalty interest of 1.5% will be charged on the entire outstanding balance for ongoing or demand loans, and on the overdue instalment for term loans.
Interest rate on pre-shipment export credit
Through the same circular, the Bangladesh Bank has announced a 1% reduction in the interest rate on export loans. As per the new guidelines, the interest rate on pre-shipment export loans will be a maximum of 9.10%. The rate was 10.10% since the announcement of the new monetary policy.
According to the circular, the central bank has implemented a new framework for calculating interest in monetary policy from 1 July this year. In this new method, banks could give loans by adding a maximum of 3% with SMART. It has been reduced to 2% for pre-shipment export credit.
As per data from the central bank, the 182 days Treasury Bill carries an average interest rate of 7.10%. Despite any reduction in the interest rate for export loans, other loans will continue to be calculated using their existing interest rates.
According to the data released by the central bank, the average interest rate of 182 days Treasury Bill is 7.10%. However, even if the interest rate of export loans is reduced, the interest rate of other loans will be calculated as before.
The Six Months Moving Average Rate of 182 days Treasury Bill (SMART) is a reference rate used by the Bangladesh Bank to set lending rates for banks. It is calculated by taking the average yield of 182-day treasury bills over the past six months.
