Loan interest rate reduced to 3.5%

The interest rate on loan under the pre-shipment credit refinance scheme has been reduced from 5 per cent to 3.5 per cent and increased the tenure of the scheme from 3 to 5 years.

Bangladesh Bank (BB) issued a circular in this regard on Wednesday.

In April 2020, BB launched the scheme of Tk5, 000 crore to help export sectors affected by Covid-19 pandemic.

The interest rate on the credit facility was fixed at 6 per cent after the launching of the fund. But exporters were not interested to take loan from the fund because of the high interest rate, according to the sectorial people.

The Central Bank then reduced the rate by 1 per cent and fixed it at 5 per cent last year. Even then, due to lack of response the interest rate has now further been reduced to 3.5 percent.

Mohammad Fazlul Azim, Vice President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) welcomed the decision of the Central Bank.

He told The Business Post that Many RMG owners did not want to take this loan because of high interest rate.

Now the business men in the export sector will be interested in taking this loan. Fund will no longer be unutilized. On the other hand, our cost pressures will be reduced a bit, making it easier to meet other costs, he added.

The Central Bank circular stated that no charges or fees could be imposed by the lender bank on the customer out of the existing policy.

Participatory banks in this scheme will be able to provide pre-shipment loans on the basis of its relationship with customers.

The loan amount will exclude other costs including the cost of back-to-bank LC from the value of each confirmed export order.

Loans can be disbursed to a customer during the tenure of the fund (5 years) in multiple different times. Previously a customer could take this loan for a period of one year.

Defaulters will not able to get loan from this fund. In addition, if the customer fails to repay the loan on time, it has to be classified and provisioned as per the existing policy.

Single borrower exposure limit will be applicable to disbursing the loan. Banks will follow their own rules and regulations in selecting borrowers and supervising the use of loans, the circular stated.