Bangladesh Bank eases provision rules for consumer credit

Bangladesh Bank has eased the provision rules to encourage commercial banks to disburse more consumer credit for the purchase of cars, furniture or electronic goods.

Banks are now required to maintain 2 percent general provision against unclassified loans under consumer financing other than house financing and loan to professionals, according to a circular issued on Tuesday.

The rate had been previously fixed at 5 percent.

The latest central bank circular also cited emergent demand for consumer loan as a reason behind its decision to lower the general provision against consumer loans.

When the central bank capped the interest rate at 9 percent for all loans other than credit card on Apr 1, the banks faced trouble in consumer financing, which ultimately affected consumption and thus many businesses.

Mashrur Arefin, CEO and managing director of City Bank, told that they could not profit much with the 5 percent general provision after the interest cap came into effect.

“Now at least we can pay the expenses even if we can’t make any profit,” he said of the ease of rules.

“The customers will get credit and it will impact different sectors positively,” he added.