Relaxed loan conditions for exporters

Bangladesh Bank (BB) has decided to relax conditions of loans from export credit fund to deal with the impact of coronavirus on trade and commerce.

With this decision, exporters will now be able to borrow at a low-interest rate from this fund to meet necessary expenses before shipping goods.

Additionally, an earlier provision to provide loan only after shipment of goods has been cancelled. Besides some other conditions have relaxed as well.

BB on Wednesday (July 22) issued a circular in this regard and sent it to chief executives of commercial banks.

One of the previous conditions for such loans was that exporters could receive loans only after shipment was made.

However, the central bank has recently been informed by the banks that this condition was pointless since it allowed them to review documents only. Exporters didn’t have to prove if the export product was fully ready. As a result, it was not possible for banks to be sure on the spot whether the clients produced the goods or shipped the goods as per the conditions of the central bank. Therefore, this condition has been cancelled and from now on, exporters will be able to take loans before shipping goods.

Another condition to repay loan amount within four months has been extended to six months.

According to the circular, exporters will be able to lend from the three-year fund for a maximum of one year.

However, after payment by foreign client, exporters can repay the loan and take a new loan. Usually, the export cost is paid within 3 to 4 months. In this case, exporters will be able to lend 3 to 4 times a year from this fund. Loans can also be taken in the name of more than one company of the same group.

Moreover, when producing export products, exporters had to take an extra for paying salary, allowance and other works at 9 percent interest rate which has been reduced to 6 percent.

The export credit fund was set up to provide low-interest loans to exporters in local currency. There is another fund called Export Development Fund to import raw materials for producing export-oriented products for which loans are given in foreign currency at 2 percent interest.

Additionally, on April 13, BB set up a refinancing fund of Tk 5,000 crore to issue low-interest loans in the export sector. From this fund, BB will provide loans to commercial banks at 3 percent interest and these banks will issue loans to exporters at 6 percent interest rate.