Stimulus for Small Firms: Disbursement to run till June

Bangladesh Bank yesterday extended the deadline for disbursing a Tk 20,000 crore stimulus package for cottage, micro, small and medium enterprises (CMSME) by another three months to June.

The extension comes in response to a slow pace in the lending of loans from the package.

The central bank declared the package in April last year to help the businesses cope with the economic slowdown caused by the coronavirus pandemic.

Banks disbursed 72.31 per cent of the package as of March 31, according to data from the central bank.

Though the deadline has already been extended twice, many banks showed unwillingness to disburse loans to the SME sector, which is considered the bedrock of the economy. 

Half of the package would be provided from the BB in the form of a refinance scheme.

The stimulus scheme of a three-year tenure acts as a revolving fund, meaning banks would disburse money recovering those from clients.

But banks have showcased a lacklustre performance in the first year of the package's disbursement.  

The loans will be provided at a 9 per cent interest rate. Of the interest rate, 4 per cent will be borne by the borrowers and 5 per cent by the government.

Meanwhile, the central bank has also extended the deadline of relaxed restructuring and rescheduling facilities for tanneries.

The tanneries, which have been facing the burden of default loans for years, will be allowed to enjoy the relaxed facility until June instead of the previous deadline of March, according to a central bank notice.

The decision has been taken as businesses of the tanneries might face another shock due to the second wave of the coronavirus pandemic, it said.

A good number of loans disbursed among the tannery owners have become defaulted due to their failure to repay instalments on time on different grounds, according to a previous central bank notice issued in January.

The inability to repay the loans created a roadblock to the usual credit flow to the tannery sector.

Banks are allowed to offer a one-time exit policy with only a 2 per cent down payment for the tannery owners, who are unable to run their business.

The tannery owners, whose bank loans amounted to up to Tk 5 crore as of December 31 last year, will get a three-year timeframe for the exit.

Defaulters with loans of more than Tk 5 crore will have a maximum of five years to repay the loans.

The tannery owners, who are able to run their business, will enjoy a rescheduling facility by making only a 2 per cent down payment.

Banks are permitted to reschedule the loans for 10 years, which include a one-year grace period.

Banks can impose a maximum of 9 per cent interest on the rescheduled or restructured loans.

The interest amount of the loans can be rebated by banks but there is no scope to waive the principal amount.