24 August 2023 09:01 am Views - 2155
The Monetary Board of the Central Bank has decided to impose administrative caps on certain lending products of financial services institutions, as interest rates charged on these products still remain at extremely high levels despite the sharp decline in policy interest rates.
Accordingly, the Board decided to impose caps on interest rates on pawning facilities at 18 percent per annum; on pre-arranged temporary overdrafts at 23 percent per annum and on credit cards at 28 percent per annum, for all licensed banks.
Further, the Board was of the view that penal interest rates need to be capped at 2 percentage points over the regular interest rates charged on the relevant credit facility.
In addition, the Board noted that other market lending interest rates on rupee loans and advances should also adjust downwards further.
The Central Bank noted that the downward adjustment in market lending interest rates in response to monetary relaxation has been disproportionate to the reduction effected in market deposit interest rates.
Meanwhile, the Monetary Board of the Central Bank at its meeting held on 23 August 2023, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 11.00 percent and 12.00 percent, respectively.