BB relaxes rules on borrowing to exporters
Bangladesh Bank yesterday said businesses that export goods guaranteed by reputed export credit agencies (ECAs) will be able to enjoy loans as per their need, even if it goes beyond the single borrower exposure limit.
As per the single borrower exposure limit, banks are not allowed to give out loans that are more than 25 per cent of their capital to a single person, entity or business group.
However, exporters who supply goods guaranteed by ECAs that are AAA rated by globally accepted credit rating agencies can now avail of loans beyond the single-borrower exposure limit.
ECAs offer finance and other services to facilitate international trade.
As such, most countries have ECAs that provide loans, loan guarantees and insurance to help eliminate the uncertainty involved in importing and exporting with other countries.
In addition, the purpose of an ECA is to support the domestic economy and employment by helping companies find overseas markets for their products.
An official of Bangladesh Bank said there is less risk in exporting products when the shipment is guaranteed by a reputed ECA.
This is because the ECA will pay exporters for their goods even if the foreign buyer is unable to do so and for this reason, loans given by banks to exporters will not create any risk, he added.
Fazlul Hoque, a former president of the Bangladesh Knitwear Manufacturers and Exporters Association, said this is a welcome initiative as it will help exporters manage their required funds.
However, he reckons that complexity may be created as exporters usually make shipments to different buyers at the same time.
Besides, there is a possibility that some importers who source goods from the domestic market will be able to manage guarantees from reputed ECAs while others may fail to do so.
"Under such a situation, banks may face ambiguity in disbursing loans to exporters," Hoque said, adding that the BB should clarify the issue through another notice.
As per existing central bank norms, the single borrower exposure limit is also not applicable to the loans given to the government or companies that have managed payment guarantees from the government.
In addition, borrowers that have got guarantees from multilateral development banks are also permitted to enjoy loans beyond the limit.