Badrul Ahsan :
Commercial banks are now trying to boost credit-card based business due to its higher interest rates and slumping demand of both lending and deposits in other sectors, sources at Central Bank said.
According to them, the interest rates charged by the banks against card based loans differ between 30 per cent and 36 per cent whereas interest against lending dropped to a single digit for the last two years.
Bangladesh Bank (BB) data shows that 30 banks issued 9.46 lakh credit cards as of January, 2017 with The City Bank leading the way.
The City Bank alone issued 2.20 lakh credit cards to its clients.
According to the data clients received Tk 3,120 crore through credit cards in the October-December quarter, while the amount was Tk 3,030 crore in July-September quarter of last year.
Banks had disbursed Tk 2,849 crore in loans through credit cards in 4th quarter of 2015.
Clients are exempted from paying interest if they quash the loan in 40-45 days from the date of disbursement.
A BB official told The New Nation on Tuesday that the amount of loans disbursed through credit cards in 2015 and 2016 indicated that banks failed to popularise the service on a large scale.
Banks, however, showed that they issued a significant number of credit cards in 2016. The number of credit cards issued by banks was 6.32 lakh as of December, 2015.
A number of clients have taken credit cards as banks have employed separate   workforce with the aim of popularising the service, the BB official said. But the clients used the cards on a limited scale to avoid higher interest rates and other hidden charges, he said.
However, many clients alleged that the Private Commercial Banks (PCBs) are illogically charging exorbitant interest on loans through credit cards, capitalizing the helplessness of people.  "People cannot manage a loan due to its procedural complexities, but obtaining a credit card is easier compared with other loans which lured people to avail credit cards despite higher interest," Ahmed Kamal Sobhan, a credit card holder said.
Meanwhile, Bangladesh Bank (BB) officials said the higher interest rates charged by banks was not logical as the overall interest rate both for lending and deposit continued falling in last two years. They also said that the banks did not lower the rates of interest on their credit-card products in last two years, although they cut the rates of interest on their other consumer-loan products in the period. The average interest rate for deposit also decreased to around five per cent in February this year from around nine per cent two years agao.
"For example, the rate of interest on personal loans came down to single digit from around 16 per cent in last two years, but they did not lower interest rate against credit card based loans," the BB officials added. Meanwhile, due to the higher interest rate, a large number of eligible clients are reluctant to get credit-card service from banks, they said. Replying to a question of The New Nation, the Central Bank officials said, the BB has nothing to do with lowering the interest rates in credit card-based loans as banks usually set the rates on the basis of free-market practice. Sohail RK Hussain, Managing Director of The City Bank told The New Nation that his bank gained huge success in popularising credit cards among people. 'We are the number one player in the market. But we are yet to decrease the rates of interest [on credit card-based loans] due to a huge infrastructure cost [the service involves]. We have to ensure cyber security so that clients can use the cards safely,' he said. The interest rate will go down automatically when the service will be more popular in future, he said.
Credit-cardholders are now enjoying a number of discount facilities when they purchase certain products in different shopping centres, Sohail said adding 'The clients are getting reimbursement facility through credit cards against higher interest rates.' Md Arfan Ali, Managing Director of Bank Asia said that the banks had to face more operational cost to monitor loan disbursement through credit cards, which escalated the interest rate for the banks' loan product.
"Besides, the ratio of defaulted loans in the area is higher and banks have to keep provision against the non-performing loans," he said. NPLs play a significant role in increasing the interest rates for the credit card-based loans, Arfan said.
He, however, hoped that the rates of interest on the product would decrease as more banks now showing interest in introducing the service.