Export-oriented industries eligible to borrow from BB pre-shipment refinance scheme at 6% interest

The Bangladesh Bank has unveiled new liquidity support for export-oriented industries amid a slowdown in external trade in the wake of the coronavirus pandemic. 

In a circular issued on Monday, the central bank said export-oriented industries will be eligible to take loan from its pre-shipment refinance scheme of Tk5,000 crore at maximum six percent interest.

The banks would get the fund from the Bangladesh Bank at three percent interest, it said.

Pre-shipment finance helps exporters meet the packaging and overhead costs before shipping products.

It is a short-term loan for up to six months but no loan defaulters will have access to the fund, officials at the Bangladesh Bank said.

The economic globalisation has come to a grinding halt due to the coronavirus pandemic. Like elsewhere in the world, export order cancellations and production cut are hurting Bangladesh's export earnings too. 

To speed up the country's economic activity and export earnings at this critical point, the Bangladesh Bank formed the Tk5,000 crore refinance fund to support the export-oriented industries with pre-shipment finance, officials at the central bank said. 

The Bangladesh Bank formed the scheme with its own fund and the eligible companies will only get loan against pre-shipment costs. Any export-oriented company will be eligible for the fund but the approval of loans will completely depend on the respective banks, based on bank-customer relationship. 

The duration of the fund will be three years and it will revolve. Plus, the local export-oriented industries will get fund for more than once in a year. 

Defaulters and companies that are yet to receive their export earnings will not be eligible for the fund. 

The banks will be allowed to apply for the fund against each confirmed export order or letter of credit (LC). And the credit issuable will be fixed after the exclusion of back-to-back LC value, financing for accessories and other relevant costs.

However, the exporters will not get more than 10 percent loan, of any consignment or commercial invoice value, from the scheme. 

Also, the scheme will not apply to the export order of any shell company or LC issued by any shell bank. 

While issuing credit for pre-shipment, the banks will have to follow the single borrower limit, said the central bank, adding that the banks will be fully liable for the repayment. 

Amid the coronavirus outbreak, the central bank has taken several measures to support exporters, and small and medium entrepreneurs by enhancing the banks' lending capacity.

The measures were taken in line with the government-announced Tk77,750 crore stimulus packages to support the businesses to mitigate the impact of coronavirus that has halted the country's economic activities.

Of the fund, the government allocated Tk5,000 crore for export-oriented factories to only pay wages and allowance of their workers.