The Bangladesh Bank has increased the loan limit for garment and textile factories from the Export Development Fund (EDF) to $30 million, from an existing $25 million.
Members of the Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Textile Mills Association will be able to avail the new limit, the central bank said in a circular yesterday.
The enhanced portion – effective for disbursements until December 31 this year – shall be considered by foreign exchange dealer banks (Ads) on a case-to-case basis, depending on the actual needs of factories concerned.
Exporters will get loans – from the EDF – at two percent interest against their raw material imports.
The Bangladesh Bank has introduced the facility as many exporters failed to arrange a buyer's or supplier's credit facility during the novel coronavirus pandemic – due to supply chain disruptions.
Additionally, giving exporters relief from the interest rate shock during the pandemic is another reason behind issuing the facility, said officials at the central bank.
Usually, exporters receive a supplier's or buyer's credit facility for a period of six months and the tenure is extendable by up to 360 days against back-to-back Letter of Credit (LC) facilities.
As per the recently-announced interest rate for EDF loans, the central bank will charge one percent interest to banks, and banks will charge another one percent, bringing the applicable interest rate on exporters to two percent – which is much cheaper than a buyer's or supplier's credit facility.
On April 7, the central bank – as part of the government's measures to support exporters during the pandemic – lowered the applicable interest rate on exporters against export development fund loans to two percent from 2.73 percent.
Additionally, the Bangladesh Bank has enhanced the size of the export development fund to $5 billion, from $3.5 billion.
However, the loan limit for the members of the Bangladesh Knitwear Manufacturers and Exporters Association will remain unchanged at $20 million.