Dhaka, May 13 -- Bangladesh Bank has reduced the maximum penalty interest rate on overdue loans to 0.5 percent, aiming to boost investment and productivity amid the prevailing global economic challenges.

According to a circular issued by the Banking Regulation and Policy Department (BRPD) on Wednesday, the central bank lowered the penalty interest cap from 1.5 percent to 0.5 percent.

The directive, signed by BRPD Director Gazi Md Mahfuzul Islam, revises earlier guidelines issued in May 2024 on market-based interest rate determination.

Under the revised rules, banks may now charge a maximum of 0.5 percent penalty interest on overdue loans or instalments.

For continuous or demand loans, the penalty will apply to the entire outstanding a...