The decision has been taken after considering the necessity to provide relief to low income individuals who are pawning gold jewellery to meet their short-term financing needs due to the adverse economic situation resulting from the COVID-19 outbreak.
“We observe that the current interest rates charged by licensed banks on pawning advances range from 12% – 17.5% per annum,” the Bank Supervision Department of the Central Bank said in a statement.
Accordingly, an order under the Monetary Law Act was issued to the licensed banks requiring to fix the maximum rate of interest chargeable by them on the money lent on the security of personal articles made of gold accepted as a pledge for pawning to be 12% per annum or 1% per month if the pawning period is less than one year, with effect from 27 April 2020.
This maximum interest rate will be applicable for all new pawning advances and existing pawning facilities that become due for renewal commencing the date of the order.
“Further, it is expected that other institutions involved in pawning activities would also offer a lower interest rate to enable their customers to obtain urgent finances at affordable costs so that they could later on redeem their pawned gold jewellery.”