BB eases credit rules for exporters
The Bangladesh Bank has relaxed rules on securing funds from pre-shipment credit schemes and the Export Development Fund so that exporters can avail soft loans to expedite shipments and make their international business more competitive.
The central bank issued two circulars in this regard yesterday.
In the case of pre-shipment credit disbursements, lenders can now claim the amount from the BB within a week of disbursing the fund to its clients.
Commercial banks have made disbursements from a pre-shipment credit fund of Tk 5,000 crore, which was allotted by the government in April this year to help businesses survive the Covid-19 fallout.
Previously, lenders could only claim the disbursed amount after exporters delivered their shipments of goods as per the participation agreement with the BB.
As a result, the commercial banks felt discouraged to issue disbursements from the pre-shipment credit scheme, making it difficult for exporters to utilise the fund for business purposes.
Now, exporters can avail sizeable loans from the credit scheme against their letters of credit (LCs).
For instance, if the exporter avails an 80 per cent back-to-back loan, he can avail a further 15 per cent loan from the pre-shipment credit scheme with only a 6 per cent interest rate. But if the exporter had received a 70 per cent back-to-back loan, then he or she will be able to avail a 15 per cent loan from the pre-shipment credit scheme while the remainder would come out of his own pocket.
Due to the central bank's move to relax these rules, exporters can now easily purchase raw materials and pay for other preliminary expenses, making the shipment process much faster.
However, exporting companies will be allowed to avail loans from the pre-shipment credit scheme once a year in a bid to ensure that all other factory owners can avail the same facility.
If an exporter receives money from the pre-shipment scheme only after shipments are made, his business will not be competitive as he needs cash in hand to make goods and the packing lists, said Mohammad Hatem, vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
"Export trade will be boosted by the moves of the central bank. These initiatives are good. These are very positive decisions," said Monsoor Ahmed, secretary to the Bangladesh Textile Mills Association.
However, all exporters attempting to avail funds from these schemes should be treated equally, he added.
The central bank also extended the allotted time to receive payments from international buyers so that they do not incur any overdue costs for up to 720 days under the Export Development Fund. The existing timeframe is 300 days. This move will also encourage the exporters as they will get more time to pay their suppliers for raw materials, Hatem said.
Established in 1989, the EDF is intended to facilitate access to financing in foreign exchange for input procurements by manufacturer-exporters.
In April, the central bank cut the interest rate on the EDF in order to help the exporters hit hard by the economic fallout from the global coronavirus pandemic.
As a result, the exporters of the manufacturing sector now enjoy loans at 2 per cent interest from the EDF. Previously, the interest rate was six-month USD LIBOR plus 1.50 per cent. The six-month LIBOR rate is 1.17 per cent at present. Lenders get the fund from the central bank by giving 1 per cent interest rate and they are allowed to charge clients a maximum of 2 per cent.
The BB also increased the volume of the EDF to $5 billion from the previous $3.50 billion, as part of the government's efforts to prime the pump.
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