SAO PAULO (Reuters) - Brazil’s central bank is considering capping the period during which banks’ clients can use overdraft protection, in a push to reduce the interest rates paid by consumers, according to two sources with knowledge of the matter.
Banks are reluctant to impose limits on overdraft credit, one of their most profitable products. The central bank, according to the sources, wants a formula that imposes limits on the amount available to clients and the days of usage of the overdraft credit.
According to central bank data, the banks charged an average 328 percent annual interest rate in May.
The central bank declined to comment.
Banks had discussed the issue within a self-regulating group but did not reach any agreement, the sources said.
Thus, they said the central bank has decided to take the lead in discussions with financial institutions.
The central bank has already changed rules governing revolving credit lines offered by credit cards. The use of revolving credit - which could amount to up to 500 percent in annual interest rates - was limited to one month.
After that, banks are required to transfer debts to lower-cost credit products. Brazilian interest rates for consumer credit are among the highest in the world, providing a drag on economic growth.
Reporting by Aluisio Alves; Writing by Tatiana Bautzer; editing by Diane Craft