The central bank has launched a credit guarantee scheme for the cottage, micro and small enterprises allowing banks to issue up to Tk50 lakh in collateral-free loans from the stimulus package.
A central bank circular issued on Monday said guarantees against cottage, micro and small (CMS) loans ranging from Tk2 lakh to Tk50 lakh would be issued under the scheme.
The formal announcement on the scheme formation came after the Bangladesh Bank board on July 23 approved the Tk2,000-crore credit guarantee scheme.
As per the circular, the banks are allowed to issue guarantee only against the loans which will be sanctioned under the Tk20,000-crore stimulus package that the government announced for the cottage, micro, small and medium entrepreneurs.
In addition to the applicable interest, the central bank scheme also allowed the banks to charge CMS enterprises the guarantee fees that the Bangladesh Bank would receive from the banks.
For the first year, the charge would be 1 percent of the loans that would be guaranteed by the central bank.
The banks with up to 5 percent of non-performing loans will be charged at the rate of 0.5 percent of outstanding loans after the first year while the rate would be 0.75 percent for the banks which have NPLs between 5 percent and 10 percent.
The banks with more than 10 percent NPLs would not get access to the credit guarantee scheme.
The state-owned banks, however, were exempted from the NPL-related condition to enjoy the guarantee facility.
The Bangladesh Bank, in the circular, asked the banks to sign agreements with the central bank's CGS unit under the SME department to get the guarantee facility from the central bank.
The banks would be exempted from keeping any provision against the loans that would be guaranteed by the scheme even if those turn classified.
As of July 15, the banks sanctioned only Tk2,065 crore in loans for the CMSME sector from the government's stimulus package.
The dismal disbursement of loans by the banks to the sector prompted the central bank to issue the credit guarantee scheme for the CMS businesses.