Bangladesh Bank is weighing the case for resetting the cap on credit card interest rate it had set last month following fervent protest from banks.

Earlier on May 11, the BB issued a guideline on credit card operations that stipulated banks can charge the highest interest rate on consumer loans plus 5 percent, meaning the interest rate on credit cards came down to 16-17 percent -- half the previous rate.

Now, the central bank is considering setting the cap at 5 percent plus the highest interest rate on any loan, said a high official of the BB.

The development comes after the BB yesterday held a meeting, chaired by its Governor Fazle Kabir, with the top executives of banks over the issue at its headquarters.

At present, the interest rate on SME loans is the highest amongst the banks' products: about 16-17 percent. This means, the interest rate on credit cards would come to about 22 percent.

“We explained how the interest rates cap will hurt the card business and the central bank assured us of reconsidering,” said Abrar A Anwar, chief executive officer of Standard Chartered Bangladesh.

The interest rate on credit cards should be higher to make the business sustainable, he said, adding that globally the rates are high due to it being collateral free and widely disbursed.

The interest rate ceiling will reduce banks' profitability as the monitoring cost for unsecured loans is high, said a top executive of a private bank.

“The cost to ensure cybersecurity is also high,” he added.

The average interest rate on consumer loans is very low in the market: it stood at 9.52 percent in April in contrast to 9.62 percent for other loans.

The new guideline for credit card operation will now be implemented from January, said the BB official. Previously, it was supposed to take effect from the date of issue of May 11.

Another revision to the guideline that the BB is considering is allowing dual currency for supplementary credit cards. The original guideline restricted supplementary credit cards to only local currency.