Bangladesh Bank (BB) has eased foreign borrowing regulations for fully foreign-owned companies, allowing them to more easily obtain loans from their parent firms, affiliate enterprises, and shareholders.
The central bank issued a circular to this effect today, Wednesday.
According to industry insiders, this new initiative will guarantee low-cost foreign financing for foreign-owned industrial enterprises, which in turn will help attract more foreign direct investment (FDI) into Bangladesh.
Eligible borrowers
The Bangladesh Bank circular states that fully foreign-owned industrial enterprises operating in the manufacturing and service sectors—both within specialised zones, including Export Processing Zones (EPZs), Economic Zones (EZs), and High-Tech Parks, as well as outside of these zones—will benefit from this facility.
Terms and conditions
According to the Bangladesh Bank circular, for loans with a maturity of less than one year, enterprises located outside specialised zones can secure interest-free loans for working capital without requiring prior approval from the central bank.
Besides this, interest-bearing loans may be obtained at a maximum annual all-in-cost rate of 3 per cent to meet business requirements, including raw material procurement, the circular said.
These loans must be repaid in a single lump sum upon maturity and can be rolled over for a maximum of three years, it added.
For medium-term loans spanning one to five years, provisions have been made to allow interest-free loans up to US$50 million and interest-bearing loans up to $5 million for capital expenditure, such as machinery, equipment, and construction work.
Long-term loans with a maturity of more than five years can also be obtained. In those cases, where interest is applicable, the annual rate will be a maximum of 3 per cent.
According to the BB circular, there is also a provision to convert outstanding foreign loans into equity.