Written by The Banking Post
The Bangladesh Bank has cut the maximum penalty interest and profit rate on overdue loans, offering relief to businesses grappling with a slowing economy.
In a circular issued on Wednesday, the central bank directed all commercial banks to immediately cap penalty charges at 0.5 per cent on overdue amounts—down sharply from the previous 1.5 per cent.
The revised rule introduces a more proportionate approach to penalty calculation. For continuous and demand loans, the charge will apply to the total outstanding balance. In contrast, for term loans, the penalty will be imposed only on the overdue instalment, limiting the burden on borrowers.
A central bank official said the earlier higher penalty ceiling was introduced when lending rates were capped at 9 per cent, to discourage defaults under a low-interest regime. With lending rates now market-driven, maintaining such a high penalty is no longer justified.
The latest move is part of a broader policy push to reduce financial stress, encourage business expansion and sustain economic activity amid ongoing global and domestic challenges.
