BB warns banks on extra interest

The central bank has warned all commercial banks against charging any extra interest from borrowers to make more profit.
A circular issued by Bangladesh Bank said: "Some banks have been calculating interest deviating from rules, which is not desirable.”
It also made directives to the banks that no penal interest can be charged on any type of loans.
Bankers, however, have different views on such penal interest. They say this penal interest is applicable to bad borrowers.
A central bank official said no bank could charge penal interest on loans -- be it bad or good.
But such 'wholesale benefit' will encourage defaulters, a senior banker said.
He said they would talk the issue with the central bank and seek more clarification.
Bangladesh Bank's policy is to calculate interest every three months, its circular said, focusing on different types of loans and how their interest rates have to be calculated.
Muklesur Rahman, acting managing director of Eastern Bank, sees the new direction as a 'good move'. “But we seek more clarification from the central bank on how a bank calculate interest in the case of consumer credit,” he told The Daily Star.
On penal interest, Rahman said, “Why a bank should not charge penal interest on defaulters… Then, will the criminals go unpunished?
He also said if any specific sector, such as jute, becomes non-viable due to unavoidable circumstances, penal interest can be waived as per government or the central bank's decision.
But providing such wholesale benefit to all defaulters will not be wise, Rahman categorically said.