Dhaka, Bangladesh (BBN) – The central bank has asked the commercial banks to properly maintain the interest rate ceiling on lending at maximum 13 percent for housing sector, officials said on Thursday.
“We’ve issued a reminder asking the banks to provide loan to housing sector charging interest rate at maximum 13 percent,” a senior official of the Bangladesh Bank (BB), the country’s central bank, said.
The BB issued a circular in this regard on the day and asked the chief executives and managing directors of all scheduled banks to follow the directive for fixation the interest rate on housing loan.
“We have not capped interest rates on consumer financing, credit card and others,” the BB official said, adding that some banks have charged higher interest on housing loan under consumer financing without consultation with the central bank. “The banks will have to revise the interest rate on housing loan in case they are charging higher,” he noted.
On April 19 this year, the central bank of Bangladesh asked the commercial banks to fix the interest ceiling on lending in five specific areas at 13 percent to help mitigate the impact of the ongoing global economic meltdown.
The five areas are agriculture, term loan to large and medium-scale industries, working capital to large and medium-scale industries, housing, and trade financing, the BB officials added.
Realtors welcomed the BB’s latest move, saying that such measure would be able to bring a positive impact on the sector.
“We expect that the measure would help to increase investment in the sector,” President of the Real Estate and Housing Association of Bangladesh (REHAB) Tanveerul Haque Probal told BBN in the capital, Dhaka.
Under the existing regulations, the maximum per party limit in respect of housing finance by the banks will be BDT 75,00000. The housing finance facility should be provided at a maximum debt equity ratio of 80:20.
“Commercial banks shall ensure that at no time their total exposure under house financing exceeds 10 percent of their net consumer advances,” the BB said in its regulations, adding that the banks are free to extend mortgage loans for housing, for a period not exceeding 20 years.
BBN/SS/SI/AD-02October09-1:29 am (BST)