The Bangladesh Bank has increased the interest rate for pre-shipment credit refinance, a programme that assists local exporters in maintaining their shipping operations.
This decision, however, left exporters disheartened.
Under the revised scheme, exporters will be able to avail of loans at an interest rate of 5%, compared to the previous rate of 3%. Participating banks will borrow funds from this scheme at a rate of 2%, while clients will be charged a maximum of 5% interest on the borrowed amount.
The Banking Regulation and Policy Department of the central bank issued a circular on Sunday to inform about this change.
The circular explained that the new interest rate has been aligned with market-based rates.
Since July of this year, the Bangladesh Bank has removed the interest rate cap and introduced the SMART interest rate mechanism, which calculates rates based on the Six Months Moving Average Rate of Treasury Bill (SMART).
In 2020, the central bank introduced the pre-shipment credit refinance scheme, allocating Tk 5,000 crore from its reserves to aid local exporters who were grappling with challenges stemming from the pandemic.
The BB circular stated that exporters will not be eligible for this benefit if they have three overdue export bills. Additionally, orders associated with shell corporations will also be excluded from this facility.
Participatory banks will offer credit to clients based on their bank-customer relationship, excluding the amount covered by back-to-back letters of credit.
The pre-shipment credit allows clients to utilise loans for the production of goods before exporting them. Exporters can use these funds for importing raw materials, paying employee salaries, packaging items, and other relevant expenses.
Regarding the increase in interest rates for pre-shipment loans, Mohammad Hatem, the executive chairman of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), expressed concerns that this move would escalate business costs, ultimately having a detrimental impact on export earnings.
