The maximum amount of interest that banks can charge on credit cards has been hiked to 25 percent from 20 percent in tune with changes in the policy interest rate and increase in lenders' cost for fund mobilisation.

Set by the central bank, the policy interest rate is aimed at influencing the evolution of the economy's main monetary variables (consumer prices, exchange rates or credit expansion, among others).

The new credit card interest will come into effect from January 1 next year,  as per a Bangladesh Bank notice.

Now banks will be able to fix the interest rate of loans against their credit card within a maximum 25 percent considering the demand of loans and supply of creditable funds, as per the central bank notice.

The BB notice said the maximum rate has been increased to ensure sound credit risk management and to keep in line with the policy interest rate and the increasing cost of funds of banks. Earlier in 2020, a maximum 20 percent interest rate was fixed for credit card loans. The maximum interest rate of credit cards was 25 percent before it was fixed at 20 percent.

The BB notice said the maximum rate has been increased to ensure sound credit risk management and to keep in line with the policy interest rate

Industry insiders said it was lower in 2020 when a single digit lending rate was introduced.

The interest rate on loans and deposits products continue to rise in tune with the policy interest rate in Bangladesh.

The policy interest rate or repo rate now stands at 10 percent. It has been hiked several times over the past two years.

Recently, a good number of managing directors of commercial banks met with Bangladesh Bank Governor Ahsan H Mansur and requested him to rationalise the highest limit of interest for loans against credit cards.