Stop charging additional interest on refinanced agricultural and rural loans: BB to banks
If the borrower succeeds in repaying the loan within the stipulated tenure, banks cannot charge them any additional interest even if the loan instalment payment becomes overdue, said the circular.
The central bank has ordered scheduled banks to refrain from charging additional interest on refinanced agricultural and rural loans than the rate set by the regulator.
The banking regulator has sent a circular in this regard to all managing directors of relevant scheduled banks today (29 May).
The central bank's order comes following reports that some banks are charging farmers extra interest than the rate set by the regulator for the refinanced agriculture and rural loans.
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If the borrower succeeds in repaying the loan within the stipulated tenure, banks cannot charge them any additional interest even if the loan instalment payment becomes overdue, said the circular.
However, if the borrower fails to repay the loan within the stipulated time, banks can charge extra interest on the period after the tenure.
Officials familiar with the matter said refinanced agriculture and rural loans usually have a one-year tenure. Borrowers pay back the money in instalments. If the customer fails to pay the instalments for the loan on time, it is considered to be overdue.
However, despite missing the instalment repayment dates, if they can repay the loan within the stipulated year, no additional interest shall be levied on them.
