Dhaka, Bangladesh (BBN) - The central bank of Bangladesh has relaxed its regulations on external borrowing by fully foreign-owned industrial enterprises, allowing them to access loans from parent companies, associates, and shareholders abroad under a general authorization framework to facilitate easier access to finance.
Eligible manufacturing and service-sector enterprises operating both within and outside specialized zones, including EPZs, EZs and High-Tech Parks, will be able to obtain short-, medium- and long-term foreign loans subject to specified conditions, according to a notification issued by the Bangladesh Bank (BB) on Wednesday.
For short-term borrowings of less than one year, companies outside specialized zones may obtain interest-free loans for working capital purposes without prior approval from the Bangladesh Bank. They may also avail cost-bearing loans at an all-in-cost of up to 3.0 per cent per annum for bona fide business purposes, including input procurement. Such loans must be repaid in a bullet payment at maturity and may be rolled over for a maximum aggregate tenor of three years.
For medium-term borrowings of one to five years, the central bank has allowed interest-free loans of up to US$ 50 million and cost-bearing loans of up to $5.0 million for capital expenditure, including the purchase of machinery, equipment and construction.
Long-term borrowings of more than five years will also be allowed, with borrowing costs capped at 3.0 per cent per annum where applicable, officials at the central bank explained.
The notification also allows outstanding borrowings to be converted into equity subject to existing regulations.
Industry insiders believe that the new measures are expected to improve access to affordable overseas financing and encourage greater foreign investment in Bangladesh.
BBN/SSR/AD