The Bank of Algeria has established new regulations to cap interest rates across various banking loans. The institution decided to slash excessive interest rate margins by half, dropping the threshold to 5 percent compared to the 10 percent benchmark used in the previous half-year. According to financial regulation and banking expert Idir Saci, this represents a substantial intervention by the central bank aimed at revitalizing investment dynamics nationwide.
The new directive, Instruction No. 06-2026 issued on June 29, 2026, amends Instruction No. 08-2016 from September 1, 2016, concerning excessive interest rate calculations. The central bank explained that the primary revision alters Article 2 of the 2016 mandate. Under the updated clause, any loan is classified as carrying an excessive interest rate if its overall effective rate exceeds by more than 5 percent the average effective rate applied by banks and financial institutions for similar transactions during the preceding six months. The apex bank confirmed that this rule enters into force immediately upon its signing date.
This regulatory change tightens the framework for excessive rates by cutting in half the legal tolerance margin granted to commercial lenders on overdrafts, consumer loans, short-term credits, medium-term credits, long-term financing, mortgage backing, and leasing operations. To illustrate the shift, the central bank noted that back in 2021, a loan rate was deemed usurious if it surpassed the previous semester’s average by more than 10 percent. In 2026, that buffer is locked at 5 percent. The central bank had previously set credit interest rate ceilings at the end of 2025, which remained valid through the first half of 2026.
Characterizing this reduction as a significant undertaking by the financial authority, Saci explained that this 5 percent figure operates as a coefficient applied directly to interest rate calculations. Consequently, the central bank’s memo alters the fundamental methodology for computing these caps.
From a macroeconomic viewpoint, the expert described the intervention as highly critical, emphasizing its direct impact on reviving broader business investment momentum.
Furthermore, commercial banks should not feel penalized by the adjustment. Saci pointed out that this decision follows prior easing measures, notably the central bank’s earlier reduction of its main policy rate to 2 percent from 3 percent, which was also designed to stimulate consumer spending and capital investment.
He observed that since the policy rate cut, analysts have argued that the move needed to be paired with lower commercial bank lending rates to effectively unlock credit lines. These combined actions are heavily expected to foster a more favorable investment climate.
On Tuesday, the Bank of Algeria published a subsequent memorandum (Note 01-2026) specifying the exact maximum interest rate thresholds for the second half of 2026. This documentation arrived just a day after the issuance of the directive that reshaped how these ceilings are calculated.
In its official notice, the central bank stated: “In accordance with Instruction No. 08-16 of September 1, 2016, regarding the determination of excessive rates, as amended by Instruction No. 06-2026 of June 29, 2026, specifically articles 13 and 14, and based on the declarations of overall effective rates for the first half of 2026 by commercial banks and financial institutions, the Bank of Algeria hereby fixes the maximum interest rate thresholds for various credit categories for the second half of 2026.”
The newly established excessive interest rate boundaries are set at 7.89 percent for overdrafts, 9.89 percent for consumer loans, 7.20 percent for short-term credits, 6.34 percent for medium-term lending, 6.03 percent for long-term financing, 7.05 percent for housing loans, and 10.59 percent for leasing arrangements. These updated limits replace the previous figures published at the tail end of last year, which governed the market during the first half of 2026.