Staff Reporter:
The Bangladesh Bank has introduced a Tk20,000 crore pre-financing scheme aimed at reviving closed industrial and service-sector enterprises, with strict conditions barring loan defaulters, money launderers and fraudsters from accessing the facility.
The central bank issued a circular in this regard on Thursday, saying the initiative has been taken to boost industrial production, create employment, expand exports and restore momentum in economic activities.
According to the circular, the three-year scheme will be operated using excess liquidity from scheduled banks. All scheduled banks will be eligible to participate, although each bank must sign a separate agreement with Bangladesh Bank to join the programme.
Eligible borrowers
Under the scheme, large industrial and service-sector enterprises that are fully or partially closed, or unable to operate at full capacity due to working capital shortages, will be eligible for loans.
Export-oriented and high export-potential industries will receive priority.
Bangladesh Bank also said entrepreneurs who reopen closed factories through takeover or lease agreements would be given preference.
Before approving loans, banks must verify the actual condition of the enterprise, production capacity, working capital needs and repayment ability.
However, firms suffering from management failure, technological inefficiency or marketing problems will not qualify for financing solely to cover working capital shortages.
To prove operational viability, firms must obtain certification from relevant trade bodies such as the FBCCI, BGMEA, BKMEA or other business associations. Banks may also approve loans based on their own investigations if necessary.
Ineligible entities
The circular clearly stated that customers identified as loan defaulters, or individuals and institutions involved in money laundering, fraud, embezzlement or misuse of previous loans, will not be allowed to receive benefits under the scheme.
Bangladesh Bank also warned that legal and punitive actions would be taken if any borrower misuses the funds. If any bank official or employee is found involved in irregularities or fraud, administrative action will also be taken against them.
Loan usage restrictions
The central bank said the funds can be used for workers’ wages and allowances, electricity, gas and utility bills, procurement of raw materials, execution of export orders and other production-related expenses.
However, the money cannot be used to adjust or repay existing loans.
For salary payments, no cash transactions will be allowed. Payments must be made directly through bank accounts or mobile financial service (MFS) accounts after verifying workers’ national identity cards.
A maximum of four months’ equivalent salary and allowance expenses can be financed under the scheme.
Loan ceiling and interest rates
According to the policy, no single enterprise or business group will be allowed to receive more than Tk200 crore under the scheme.
Each loan will have a maximum tenure of one year, although renewal opportunities will remain available based on fund availability and satisfactory transactions by borrowers.
Participating banks will pay 4 percent interest to Bangladesh Bank, while the lending rate at the customer level has been capped at 7 percent.
Borrowers will enjoy a six-month grace period on interest payments, after which interest collection and repayment will begin.
Repayment and monitoring
The circular said banks must pay interest or profit on the pre-financing funds to Bangladesh Bank on a quarterly basis.
Once the loan is recovered, adjusted or matured, the full amount along with the final quarter’s interest must be repaid to the central bank.
If any bank fails to repay on time, the amount will be adjusted directly from its current account maintained with Bangladesh Bank, along with an additional 2 percent penal interest.
Bangladesh Bank clarified that all risks associated with the loans will have to be borne entirely by the lending banks, including full responsibility for loan recovery from customers.
If borrowers fail to repay, the loans must be classified as defaulted and necessary provisioning must be maintained under existing banking regulations.
Strict oversight
To ensure proper use of the funds, banks have been instructed to collect weekly reports from beneficiary enterprises and conduct factory inspections every quarter.
Bangladesh Bank will also be able to conduct on-site inspections at any time.
As a precondition for loan approval, borrowers’ consent must be obtained and all relevant information and documents must be preserved separately.
The policy further stated that if any misuse of loans is detected during inspections or audits, Bangladesh Bank will recover the amount from the concerned bank’s current account at the customer lending rate plus an additional 2 percent interest in a lump sum.
Banks will follow their own internal policies regarding borrower selection, loan approval, documentation, disbursement, monitoring and supervision. To reduce risks, banks may also take collateral against working capital loans.
Special provisions for written-off loans
The policy said eligible enterprises with written-off loans may still receive fresh facilities under specific conditions through rescheduling or policy support arrangements.
In such cases, borrowers will not be treated as defaulters and their accounts will remain under SMA classification.
However, if borrowers fail to pay six consecutive monthly instalments or two consecutive quarterly instalments, the loans will again be classified as bad and loss accounts.
Bangladesh Bank also said that if borrowers are found involved in loan misuse, false information, fraud, irregularities or defaults, their information may be shared with relevant government agencies and legal as well as punitive measures may be taken.
