Stimulus loans to be 3-year revolving fund
Bangladesh Bank is likely to issue an official order in this regard on Sunday
Businesses that have been hit hard by the Covid-19 pandemic can get subsidised loans as working capital for the usual one year term, according to finance ministry officials.
The finance ministry has devised out the strategy on how the two packages worth Tk50,000 crore would be lent to industries, services sectors and SMEs, at 50 percent or more subsidised interests.
A borrower can get a loan from this revolving fund during the three-year-life of the programme.
"Bangladesh Bank is likely to issue an official order in this regard on Sunday (tomorrow)," Shirajun Noor Chowdhury, joint secretary of the ministry of finance (budget-1), told The Business Standard.
These will be revolving funds as working capital is a short term loan – maximum for one year - a company borrows to meet emergency operational needs. A borrower takes out a loan, pays back and borrows again and repays. This is how the funds revolve.
"This will end up as Tk150,000 crore funds at the end of three years," a Bangladesh Bank official said.
Prime Minister Sheikh Hasina on April 5 announced four packages of financial offers worth Tk72,750 crore to stimulate the economy hit hard by the onslaught of the coronavirus across the world.
The first package worth Tk30,000 crore will be formed by the banks for the affected industries and service sector organisations as working capital. The government will bear half of the 9 percent interest for the loans.
Under the second package worth Tk20,000 crore, banks will lend to small and medium enterprises (SMEs), including cottage industries, as working capital. Out of 9 percent interest set for the loan, the government will bear 5 percent and the customer will bear the remaining portion.
The central bank in two phases slashed the cash reserve ratio to 4 percent and repo rate at 5.25 percent to help the banks get cash cheaper. Cuts in CRR by 1.5 percentage points will release nearly Tk20,000 crore to the banks.
"We are waiting for the Bangladesh Bank. Once we get the modus operandi of the loan packages, we'll start our works," said a top official of a private bank.
The third package -- enhancing Export Development Fund from $3.5 billion to $5 billion to facilitate import of raw materials and a new credit facility will be implemented by the Bangladesh Bank.
The Tk5,000 crore fourth package "Pre-shipment Credit Refinance Scheme" at 7 percent interest will also be implemented by the BB, according to the finance ministry.
