Peru approves law enabling central bank to limit interest rates on bank loans

The Peruvian Congress passed a law allowing the country's central bank, Banco Central de Reserva del Perú, to establish maximum and minimum interest rates every six months on loans extended by banks, Reuters reported.

The measure has faced strong criticism from financial institutions and the country's government, but legislators argued that it is needed to shield borrowers from predatory lending practices.

Interim President Francisco Sagasti will seek a review of the law by Peru's Constitutional Tribunal over concerns that it could push lending to informal markets where rate caps might not apply.

"Citizens and entrepreneurs will have less chance of accessing loans," Economy Minister Waldo Mendoza wrote on Twitter. "It would mean a step back in financial inclusion."

Peru's central bank cut its benchmark interest rate by 100 basis points to 0.25% in April 2020 and has left the rate unchanged since then.