Interest rates on some credit cards have become "unacceptable" and the Bangko Sentral ng Pilipinas, like its Southeast Asian peers, is working to put a cap on the charge that bury consumers in debt, Governor Benjamin Diokno said Monday.
Capping the finance charge is among tools that the central bank is using to encourage people to spend, Diokno told ANC. A draft memo on the interest rate cap is being circulated to stakeholders.
The benchmark interest rate was cut by 175 basis points this year, now at 2.25 percent. This is used by banks to price their loans. Loans to micro, medium and small enterprises are also a priority. Banks can charge MSME loans against their reserve requirements, Diokno said. This frees up more cash in the system.
On some credit cards, interest rates can compound to 40 percent annually, Diokno said. "That is unacceptable. We're trying to limit and put a cap, as in our neighboring countries."
Diokno said the BSP's rate-cutting is currently on pause and further actions will depend on data. During a Monetary Board meeting last week, it kept the benchmark at 2.25 percent. "We continue to evaluate the situation. Last week, we felt at that time, it's the right thing to do."