Local industrial enterprises are now allowed to receive foreign currency loans with lower interest rate from offshore banking operation of banks, officials said.
Under the regulations, interested local industrial enterprises will have to submit loan proposal in prescribed forms to the Banking Regulation and Policy Department (BRPD) of the central bank for approval, according to a notification issued by the central bank on Monday.
Appropriate analysis and supporting documents will have to be furnished in the proposal, it added.
"With prior permission from the Bangladesh Bank (BB), banks, as part of their offshore banking, may make medium/long term loans/advances available to the industrial enterprises resident in Bangladesh," the central bank said in the notification.
The notification was issued as a clarification of its Policy for Offshore Banking Operation of the Banks in Bangladesh.
Earlier on February 25 this year, the central bank of Bangladesh issued the policy aiming to strength the operations of bank's offshore banking units through mitigating risk.
"We've included the regulations considering both the stakeholders advice and economic situation," a BB senior official told the FE while replying to a query.
He also said it is not necessary to get Bangladesh Investment Development Authority (BIDA)'s approval for sanctioning such foreign currency loan.
"It will help the country's industrialisation process," the central banker noted.
Senior bankers, however, predicted that such policy might adversely impact on demand for private sector credit in form of local currency in the near future.
"Local industrial enterprises may prefer foreign currency loans mainly due to lower interest rate," a senior executive of a private commercial bank told the FE.
Currently, the banks are offering their lending rates ranging between 10 per cent and 12 per cent for large and medium scale industries while interest rates on loans for small industries range between 10 per cent and 15 per cent, according to the private banker.
On the other hand, the industrial enterprises may easily borrow such foreign currency loans by paying below 6.0 per cent interest, he added.
Earlier on May 05, the central bank introduced floating interest rate policy on short-term foreign currency loans through linking with global bench mark rate.
Under the revised policy, the banker is now allowed to fix the interest rates on buyers'/suppliers' credit at six-month LIBOR (London Inter-bank Offered Rate) plus maximum 3.50 per cent instead of earlier maximum 6.0 per cent.
Besides, a bank, in its offshore banking operation, may discount/purchase accepted deferred export bills against direct and deemed exports of products produced in Bangladesh subject to compliance of applicable instructions.
"It will help improving exporters' competitiveness in the global market," the central banker explained.
The banks are allowed to provide all types of normal financial services to the fully foreign-owned enterprises in Export Processing Zones (EPZs), Private Export Processing Zones (PEPZs), Economic Zones (EZs) and Hi-Tech Parks through their offshore banking operations.
Currently 36 commercial banks out of 59 are running their OBUs across the country and disbursed loans amounting to Tk 592.27 billion as of December 2018 as per a directive issued by the Banking Control Department of BB on December 17, 1985.
