CB cuts penal interest rates imposed by banks, finance companies
View(s):The Central Bank (CB) on Friday ordered all lending institutions to cut their penal interest rates to a maximum of 2-3 per cent per annum from an astronomical 48 per cent in some cases following complaints from customers.
Banks were asked to reduce the penal rates of interest (for late payment) on all loans and advances to 2 per cent while finance companies and leasing companies were asked to reduce the rate to 3 per cent per annum with effect from August 1.
The CB said it has observed with concern that penal interest rates charged by banks, finance companies and leasing companies at present are excessively high, and that such rates are an undue burden to overdue borrowers whilst also hindering entrepreneurship development in the country.
Bank have been charging rates upto 20 per cent per annum on the amount in arrears while in the case of finance companies and leasing companies, the rates are even higher going up to 48 per cent per annum.
“… such excessive interest rates are not consistent with the present low interest rate regime prevailing in the country,” the CB said.
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