Bangladesh Bank (BB) has fixed the maximum interest rate on credit cards at 25 percent from 20 percent after banks insisted the central bank raise the rate to recover operation costs.

According to the BB, banks will be able to charge a maximum interest of 25 percent from credit card customers. So far, the maximum interest limit was 20 percent.

On Sunday, the Banking Regulations and Policies Department of BB issued a circular in this regard. The new guidelines will be effective from the first day of the new year (January 1).

In the guidelines, the central bank said, "There is a guideline to set a maximum interest rate on credit cards of 20 percent to ensure that the interest rate is reasonable and to protect the interests of customers, including providing loan facilities against the credit card limit.

"However, to ensure sound credit risk management and to keep it consistent with the policy interest rate and the increasing cost of funds of banks, the maximum interest rate on credit cards has been set at 25 percent. The banks will set the interest rate on credit cards within this range, subject to the loan demand and supply of loanable funds."