Bangladesh Bank set to revise credit card guidelines

Dhaka,  Thu,  24 August 2017
Published : 20 Jun 2017, 00:26:29 | Updated : 20 Jun 2017, 11:35:27
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Bangladesh Bank set to revise credit card guidelines

It'll come into effect from January 2018
Siddique Islam
The central bank is set to modify the guidelines on credit card operations, allowing the banks to fix the interest rate on card users on the basis of any loan instead of consumer credit.

The banks have already been asked not to charge more than 5.0 per cent of the highest interest rate of a consumer loan for credit card users.

The decision was taken at a meeting with leaders of Association of Bankers Bangladesh (ABB), a forum of the banks' chief executives, held at the Bangladesh Bank (BB) headquarters in the capital on Monday.

BB Governor Fazle Kabir presided over the meeting. The six-member delegation of ABB was led by its Chairman Anis A Khan.

The meeting also decided that the guidelines on credit card operations will come into effect from January 01, 2018.

The banks will be allowed to issue supplementary foreign currency or dual currency credit cards under the revised guidelines.  

BB earlier advised the card issuers not to issue any supplementary foreign currency or dual currency credit card.

"We're now scrutinizing the issues," BB deputy governor S K Sur Chowdhury told the FE.

On May 11, the central bank issued the guidelines on the banks' credit card operations to ensure transparency and mitigate business risks.

"The interest/profit rate on the outstanding amount of credit card will not exceed 5.0 per cent of the highest interest rate, offered in other consumer credits. Interest/profit should be charged on the unpaid amount due for payment," according to the guidelines.

It also said the method of calculation of interest/profit and other charges, number of days, minimum payment due and outstanding unpaid amount etc should be clearly explained and properly disclosed to the customers.

"The central bank has agreed to extend the timeframe by more than six months for implementation of the guidelines on credit card operations," Ali Reza Iftekhar, Managing Director (MD) and Chief Executive Officer (CEO) of Eastern Bank Limited, told the FE after the meeting.

The banks will take time to change their system to implement the new credit card guidelines, explained Mr. Iftekhar.

He also said the interest on credit card loan will come down roughly to 25 per cent from the existing level of 30 per cent after revising the guidelines.

"We've sought some benefits from the central bank to run our credit card business smoothly."

The operational cost for credit card is 8.0 per cent, while it is 3.0 per cent for other sectors, the former ABB chairman added.

ABB earlier submitted a proposal to the central bank, seeking revision of the newly-issued guidelines on credit card operations.  

"Most issuing banks offer maximum 45 days of interest-free period to credit cardholders," said Syed Mahbubur Rahman, MD and CEO of Dhaka Bank Limited, while explaining the main reason behind high interest rate on credit card loans.

The cardholders need not pay any interest for the period. But the issuing banks have to absorb the cost of fund for these days.

He also said the high interest rate is charged to cover the high operating and servicing costs of the business as well as various value-added features and benefits offered to the customers for encouraging them to use the product.

The number of credit cardholders is over 9.09 million until April 2017 with the total credit card transactions reaching Tk 108.83 billion.

    siddique.islam@gmail.com
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