Bangladesh Bank (BB) has reduced the maximum penalty interest rate on overdue loans to 0.5 percent in a move aimed at encouraging investment and improving productivity amid ongoing global economic challenges.
The decision was announced in a circular issued on Wednesday by the Banking Regulation and Policy Department (BRPD), which lowered the penalty interest ceiling from 1.5 percent to 0.5 percent.
The directive, signed by BRPD Director Gazi Md Mahfuzul Islam, revises earlier instructions issued in May 2024 on market-based interest rate determination.
Under the new guidelines, banks will be allowed to charge a maximum of 0.5 percent penalty interest on overdue loans or instalments.
For continuous and demand loans, the penalty will apply to the total outstanding amount, while for term loans it will be limited to the overdue instalment only.
The central bank said the adjustment was made in response to the “prevailing global economic situation” and the need to stimulate investment and productivity growth.
The revised instruction takes immediate effect, according to the circular.
It further stated that all other provisions of BRPD Circular No. 10/2024 will remain unchanged, including the validity of measures already taken under the previous framework.
