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Dhaka, Bangladesh (BBN) - The central bank of Bangladesh has relaxed provisioning requirement against unclassified credit card loans under consumer financing to facilitate credit card business in Bangladesh.
Under the revised provisions, the banks are allowed to maintain 2.0 per cent general provision instead of 5.0 per cent earlier against unclassified credit card loans under consumer financing, according to a notification, issued by the Bangladesh Bank (BB) on Sunday.
Provision means keeping aside a certain amount from the bank's income for mitigating risk. The bank cannot consider the amount as profit.
Currently, 1.0 per cent general provision has to be kept against unclassified loans. But in case of consumer financing, which included credit card usage, it was 5.0 per cent.
“We’ve slashed the requirement of provisioning against unclassified credit card loans aiming to promote cashless secured transaction and considering the cost of operation of the credit card business,” a BB senior official said while explaining the main objective of the relaxation.
He also said the central bank has taken the latest measure in line with the recommendations of the Association of Bankers Bangladesh (ABB), a forum of the banks' chief executives.
Earlier on June 19 last, a six-member delegation of the ABB led by its Chairman Anis A Khan met with BB Governor Fazle Kabir to discuss the guidelines on credit card operations.
Senior bankers, however, welcomed the BB’s latest moves, saying that it will help boosting credit card business in Bangladesh.
“Definitely, such relaxation will facilitate our credit card business in Bangladesh,” Abrar A Anwar, chief executive officer CEO) of the Standard Chartered Bank Bangladesh, said while explaining the possible impact on the BB’s latest move.
Currently, the number of issuing credit cards stood at around 1.0 million while 9.0 million debit cards are being used across the country, according to the market operators.
The use of credit cards as a payment instrument for purchase of goods and services is increasing day by day in Bangladesh.
Total outstanding amount of credit cards stood at BDT 29.63 billion as on December 31, 2017, the BB data showed.
BBN/SSR/AD