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Bangladesh Bank: Dollar crisis to end soon

According to Bangladesh Bank, the ongoing dollar crisis is not expected to last long as they will take measures to let the market dictate the greenback’s exchange rate.

But there is a difference between banks making profits and businesses making profits. They [banks] have to maintain many responsibilities and regulations. Encouraging sustainable banking for promoting sustainable growth became particularly crucial in this circumstance where adoption of technology became a necessity. With the evolution of technology, the entire industry has undergone a massive transformation that has changed the way financial procedures are carried out, and the way financial institutions operate.

 

A good compliance culture can benefit banks in several ways by covering more adequately organizational and individual risk; better shielding reputational risk; confidence among employees while performing their jobs; help to attract and retain talent and ensuring employee engagement; improved transparency which enables better decisions; enhanced relationship with regulators and other stakeholders; and enhanced valuation of the entity among investors.

Central bank announces BDT 25,000 Cr refinancing scheme for CMSME

The central bank has announced the formation of a refinance scheme of  BDT 25,000 crore for the cottage, micro, small, and medium enterprises (CMSME) sector from the bank’s own funds.

According to a circular of the Bangladesh Bank’s SME and Special Programmes Department, the three-year fund can be extended if necessary. Under the scheme, banks and financial institutions can charge a maximum of 7% interest from customers.

Besides, they will get refinancing at a 2% interest from the Bangladesh Bank, which will collect the refinancing amount along with interest from banks and financial institutions quarterly.

Banks and financial institutions have to distribute a minimum of 75% of the total loan disbursed under the scheme among cottage, micro and small entrepreneurs and a maximum of 25% can be distributed among medium entrepreneurs. Besides, at least 70% of loans can be given to the manufacturing and services sector and a maximum of 30% to the business sector. Defaulting borrowers will not get loans under this scheme.

Agriculture/food processing and agricultural machinery manufacturing industries, RMG, knitwear, design and decoration, ICT, leather and leather goods industries, light engineering and jute and jute industries will get high priority in this loan.

Also, plastics and other synthetics industry, tourism industry, home textiles, renewable energy (solar power), automobile manufacturing and repairing industry, handlooms, handicrafts, energy saving appliances (led, CFL bulbs manufacturing)/electronic appliances, construction industry/electronic material development industry, jewellery industry, toy industry, cosmetics and toiletries industry, agar industry, furniture industry and mobile/computer/television servicing will be preferred.

Apart from this, women entrepreneurs, entrepreneurs with special needs and those affected by any disaster will also get loans under this scheme on a priority basis.

In the case of loans given under this scheme, the grace period at the customer level will be a maximum of six months. Loan tenure including grace period shall not exceed five years. Banks and financial institutions have to enter into a participation agreement with the Bangladesh Bank to provide loans under this scheme.

Government banks can give loans under this scheme. However, to give loans to private and foreign banks and financial institutions, their classified loans must be less than 10% and they must have a minimum of three years of business experience.

BB introduces €200m green transformation fund

Bangladesh Bank (BB) has introduced €200 million Green Transformation Fund (GTF) along with the existing US$200 million to set up environment-friendly infrastructures.

A decision has been taken to introduce €200 million along with the existing $200 million. Accordingly, participating Authorized Dealers (ADs) will now be in a position to draw loans in euro from GTF at the rate of Euro Interbank Offered Rate (EURIBOR) plus 1.0 per cent for the admissible purposes.

In the case of EURIBOR remaining in negative territory, ADs will be charged only at the rate of 1.0 per cent against their borrowing from the fund. As usual, ADs shall determine their mark-up above the borrowing cost within the specified range of 1.0 to 2.0 per cent.

The central bank also decided that financing on long term basis (5 to 10 years) from GTF in Euro will be admissible to all manufacturing industrial enterprises for importing of environment-friendly and energy-efficient (including solar energy and renewable energy under power sector) or green capital machinery and accessories (including buyer’s credit).

This GTF in Euro is also to widen the scope to import (only buyer’s credit) industrial raw materials used in all manufacturing enterprises including both export oriented and deem exporters.
The policies of the fund are as follows:
  1. Green Transformation Fund (GTF)-USD
  2. Green Transformation Fund (GTF)-Revised
  3. Green Transformation Fund (GTF) Guidance Note

9 banks, 5 FIs sign TDF scheme

A refinance scheme of BDT 10 billion in the name of Technology Development Fund/Upgradation (TDF) has been established in Bangladesh Bank.

This fund has been established in conformity of ‘Export Policy 2018- 21’ with a view to enhancing competitive capacity and sustainability of the export oriented industries.

The Sustainable Finance Department of Bangladesh Bank organized a signing ceremony of the Participation Agreement (PA) of 9 banks and 5 Financial Institutions (FIs) with Bangladesh Bank on Wednesday.

Mr. Ahmed Jamal, Deputy Governor was present in the signing ceremony as the chief guest. Mr. Md. Shahidul Islam, Executive Director, Mr. Khondkar Morshed Millat, General Manager along-with the concerned officials of Sustainable Finance Department were present in the event. General Manager of Sustainable Finance Department on behalf of Bangladesh Bank and the Chief Executives of Eastern Bank Ltd., Mutual Trust Bank Ltd., Mercantile Bank Limited., Southeast Bank Limited., Exim Bank Ltd., The Premier Bank Ltd., NRB Bank Ltd., Bangladesh Krishi Bank, IPDC Finance Ltd., IDLC Finance Ltd., Bangladesh Finance & Investment Co. Ltd., United Finance Ltd. and Infrastructure Development Co. Ltd. signed on behalf of their respective organizations.

Overview of Technology Development Fund (TDF)

Refinancing Scheme      : Technology Development Fund/Upgradation (TDF).
Purpose of the scheme  : For strengthening the capacity and increasing the sustainability and competitiveness of the units.
Industry Nature              : Must be export-oriented industries.
Fund Size                         : BDT 1000.00 crore
Loan Tenure                    : 5-10 years
Grace Period                   : Not more than one year.
Debt-Equity Ratio         : 70: 30
Interest rate                    :1. 5.00% on the loans having the tenure below five years
2. 5.50% from five years to below eight years
3. 6.00% from eight years to 10 years.

Entitled Organizations: 32 types of industries and 11 types of operations including ready-made garment factories, pharmaceuticals, software and IT-enabled services, jute goods and, footwear and leather goods.

Refinancing Scheme : Technology Development Fund

Bangladesh Bank is forming a Tk 1,000 crore fund to provide cheap loans to export-oriented industries to upgrade technologies they currently use. The eligible industries are of 32 types, all falling under top-priority and special development sectors.

They include ready-made garment factories making high-value additions in production, pharmaceuticals, software and IT-enabled services, jute goods and footwear and leather goods.

The fund will run under a refinancing scheme, meaning banks will first give out the loans before being reimbursed by the central bank.

The interest rate will range between 5 per cent and 6 per cent, according to a central bank document.

The central bank will issue a notice within a week or two to this end. The fund will help make the export-oriented industries more vibrant in keeping with global trends.

The transformation can be brought about in 11 types of existing industrial production-related operations to replace outdated technologies with the latest ones such that industrial production gains momentum.

Replacement of outdated machinery, adoption of technology for renewable energy and upgradation of machinery used in business operations and waste management will get priority.

Interested banks and non-bank financial institutions will have to sign a participation agreement with the central bank.

They can then avail the fund at one percentage point less than the bank rate that happens to prevail at that time.

A bank rate is the interest rate at which a central bank lends money to banks.

Managing the bank rate is a method by which central banks influence economic activity. Lower bank rates can help expand the economy by lowering the cost of funds for borrowers.

Currently, the rate is 4 per cent. If a bank happened to have availed the fund now, it would have been charged 3 per cent.

Banks will be allowed to charge borrowers a maximum three percentage points higher than the rate at which they avail the fund.

The tenures would range from three years to 10 years.

The interest rate for a borrower will depend on the time within which it makes the repayment.

It is 5 per cent for less than five years, 5.5 per cent for between five years and less than eight years, and 6 per cent for eight years to 10 years.

Clients will also enjoy a maximum of one year’s grace period before they start paying the installments.

A 7:3 debt to equity ratio will have to be maintained, which means that a borrower can avail 70 per cent of the upgradation cost from the lender while the remaining 30 per cent has to come from its pocket.

Banks that have non-performing loans of more than 10 per cent of their outstanding loans will not be allowed to avail the fund.