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The Bangladesh Bank has raised the interest rate on credit card loans by 5 percentage points to 25 per cent to ensure effective loan risk management as well as align with the policy rate and banks' rising funding costs.
It issued a circular in this regard on Sunday, asking banks to follow the new directive to fix interest rates. The new directive will take effect on January 1 next year, according to the circular.
Banks would also determine the interest rate within this limit based on their loan demand and funding availability, it added.
The central bank further stated that Islamic Shariah-based banks would adjust their profit rates on investments in line with this guideline, while all other instructions would remain unchanged.
The directive was issued under the power conferred by sections 29(2)(cha) and 45 of the Bank Company Act 1991.
Sources say City Bank, BRAC Bank, Eastern Bank, and Standard Chartered Bank lead the credit card market.