Dhaka, May 14 -- The central bank has reduced the maximum penalty interest and profit rate on overdue loans and investments in a move aimed at easing financial pressure on businesses and encouraging investment amid prolonged economic sluggishness.

Under the broader policy objective, Bangladesh Bank (BB) on Wednesday issued a circular instructing commercial banks to implement the directive immediately.

According to the circular, if any loan, investment or instalment becomes fully or partially overdue, banks will be allowed to impose a maximum penalty rate of 0.5 per cent for the period the amount remains unpaid, instead of the existing 1.50 per cent. The directive also outlined separate application methods depending on the type of credit...