The Bank of Algeria has announced new limits for excessive interest rates applicable to various types of loans for the first half of 2025.
This decision, which is part of the regulation of the banking market and the preservation of financial balance, specifically concerns consumer loans, mortgages, leasing, bank overdrafts, as well as short, medium, and long-term loans.
In an official statement dated December 11, 2024, and addressed to banking institutions, the Bank of Algeria detailed the maximum thresholds for excessive interest rates that will be effective from January 2025. This measure follows Instruction No. 08-16 of September 1, 2016, which outlines mechanisms for controlling excessive interest rates, and takes into account necessary adjustments after analyzing recent data.
The new caps have been set based on the declarations of global effective rates from the second half of 2024, provided by banks and financial institutions. The aim is to ensure better regulation of interest rates and maintain financial balance in the banking market while protecting borrowers from excessive costs.
Adapted Rates According to Loan Categories
The Bank of Algeria’s statement specifies that interest rates vary by loan type. An annexed table to the circular shows the average effective rates from the second half of 2024 and the maximum caps set for each loan category for the first half of 2025. For example, for bank overdrafts, the average effective rate is 7.80%, with a maximum cap set at 8.58%. For consumer loans, the average rate is 9.52%, with a ceiling of 10.47%.
These adjustments aim to regulate banking practices and prevent excessively high interest rates from burdening individuals and businesses. This initiative is part of a broader approach to transparency and regulation in the banking sector, enhancing consumer trust.
A Measure to Strengthen Financial Stability
Signed by Abdelhamid Boulouadnine, the Director General of Credit and Banking Regulation at the Bank of Algeria, this circular will come into effect at the beginning of 2025. It is part of a wider strategy aimed at strengthening the country’s financial stability and promoting sustainable economic development.
By setting clear limits for interest rates, the Bank of Algeria intends to prevent abuses and ensure fair competition among financial institutions. This approach is also accompanied by efforts to improve transparency in banking operations, which should benefit all economic actors.
This announcement comes at a time when financial market regulation has become a major issue for Algerian authorities, who are keen on protecting borrowers while maintaining an environment conducive to economic growth. With these new measures, the Bank of Algeria reaffirms its central role in stabilizing the national financial system.
