Bangladesh Bank yesterday tightened loans to buy cars and homes in an effort to rein in credit to the unproductive sector.

The BB has made car loans dearer by raising the buyer's portion to 70 percent from the previous 50 percent, according to a statement released yesterday. It means a would-be buyer will have to pay Tk 14 lakh out of his own wallet and can borrow a maximum of Tk 6 lakh from a bank for a Tk 20 lakh car.

A prospective home buyer can borrow 70 percent of his finance from a bank, down from 80 percent earlier, according to the statement.

“The move will slow down the flow of money to the unproductive sector and help curb inflation,” a senior BB official said.

The use of cars has been rising and successive governments could not rein in the trend by imposing high tariff on car imports. Importers have to pay more than 200 percent tax for a 1,500cc (engine power) car. Tariff rates go up depending on the engine capacity.

Lenders also hailed the move saying it would help curb inflation and the city's traffic congestion.

“It will help contain inflation,” said Anis A Khan, managing director of Mutual Trust Bank. On the home loans, Khan said it is not easy to get.

“One has to demonstrate a cash flow and meet conditions to take home loans,” he said.

The BB in a separate circular yesterday asked commercial banks to keep the spread, which is a gap between lending and deposit rates, within 5 percent.

But risky consumer credit such as credit cards and loans to small and medium enterprises has been kept out of the directive, the central bank said.

The BB took the decision following complaints from businesses against banks charging higher rates for loans. Many banks have increased lending rates by 4 percentage points, even for old loans.

The Daily Star/Bangladesh/ 23th Jan 2012