9% interest rate on loans: petition challenges legality of central bank decision

A writ petition was filed with the High Court today, challenging the legality of Bangladesh Bank's decision that instructed the scheduled banks to set a maximum 9 percent interest rate on all loans except credit cards.

Md Mahfuzur Rahman, an apprentice lawyer, submitted the petition praying to the HC to issue a rule upon the respondents to explain why the directive issued by the central bank on February 24 should not be declared illegal.

Finance secretary, Bangladesh Bank governor and its general manager (Banking Regulation and Policy Department) Rezaul Islam have been made respondents in the rule.

The petitioner also requested the HC pass a stay order upon all operation of the central bank's direction till disposal of the rule.

In the writ petition, Mahfuzur Rahman said the central bank's decision may severely affect the already suffering banking sector and such restriction about reducing the interest rate is unlawful against establishment of financial policies and international practices of free market economy.

The notification does not mention any reason behind directing all scheduled banks to charge interest rate at a maximum rate of 9 percent, he said in the petition, adding that such restriction will further stifle the availability of loans necessary for setting up and expansion of small, medium and large businesses and commercial entities.

Consequence of significant reduction in the interest or profit charged by the bank would also sharply fall impacting upon income of the depositors via fixed deposit schemes, resulting in serious prejudice to middle income group of the country, and therefore, Bangladesh Bank's decision is a violation of the fundamental right of "equality before law" guaranteed under article 27 of the constitution, the writ petitioner said in the petition.