BB forms Tk15,000cr refinance scheme to support banks, NBFIS

The Bangladesh Bank (BB) has formed a Tk15,000 crore revolving refinance scheme with a view to supporting banks and financial institutions implementing the Tk30,000 crore stimulus package launched for large industry and service sectors entities affected by the coronavirus.

As per a BB circular issued on Thursday, the banks and non-bank financial institutions would be entitled to get fund from the central bank's refinance scheme at 4 percent interest.

Banks and NBFIs would get 50 percent as refinance from the BB against the loan they disburse to affected industry and service sector entities.

The Tk15,000 refinance scheme, formed with the central bank's own fund, was launched for a period of three years, the BB circular said.

To get the fund from the scheme, the banks or NBFIs will have to sign a participation agreement with the BB, said the circular, adding that the refinance facility would only be issued against the working capital provided by the banks to sectors allowed by the BB.

On April 12 this year, the central bank, in line with the government's announcement, issued guidelines on issuing working capital facility to industries and the service sector affected by the pandemic, setting interest rate ceiling at 9 percent.

Of the 9 percent interest, the government would provide 4.5 percent as a subsidy and the remaining 4.5 percent would be paid by the borrowers.

Thursday's BB circular asked the banks and NBFIs to file an application to the central bank for refinancing fund within 10 days of loan disbursement to the businesses as specified by the central bank.

Afterwards, the central bank would release 50 percent of the outstanding loans that were disbursed to the affected businesses by the banks or NBFIs.

The banks and NBFIs would be entitled to get access to the refinance fund for three years upon complying with the BB set limit for banks.

Banks or NBFIs will have to pay quarterly basis instalments within 10 days of the immediate next month of each quarter-end.

In case of lending to any other sectors, which were ineligible for the stimulus package, the central bank would charge 2 percent on the banks or financial institutions as a penalty.

An official of the central bank said the refinance fund would motivate the banks and NBFIs as they will have to take the credit risk of the lending.

Besides, it would also help to save the banks from any liquidity crisis as the implementation of the government-announced stimulus packages to revive the economy after the coronavirus would require a huge amount of credit, the BB official said.