Bangladesh Bank has reduced the penalty interest rate on overdue loans and investments to 0.5 per cent from 1.5 per cent, in a move aimed at easing pressure on borrowers and supporting economic activity.
Previously, banks were permitted to impose up to 1.5 per cent penalty interest on overdue loans or instalments.
The charge was applied to the total outstanding amount in the case of continuous and demand loans, while for term loans it applied to overdue instalments.
Under the revised directive issued on Wednesday, Bangladesh Bank has capped the penalty at 0.5 per cent for the period a loan remains overdue, effectively reducing the maximum burden by two-thirds.
The central bank said the revision replaces earlier instructions in light of prevailing global economic conditions and is intended to encourage investment and productivity.
According to the directive, all other provisions of the earlier circular will remain unchanged, and actions already taken under the previous framework will continue to remain valid.
The directive was issued to managing directors and chief executives of all scheduled banks.
