Dhaka, Bangladesh (BBN)-The Bangladesh Bank has allowed low-cost credit facility upto $15 million from Export Development Fund (EDF) for local textile mills and dyed yarn manufacturers-exporters to increase export.
The Foreign Exchange Policy Department (FEPD) of the central bank issued a circular to this effect on Wednesday asking authorised dealer (AD) banks to borrow from the  EDF for member industries of Bangladesh Textile Mills Association (BTMA) and Bangladesh Dyed Yarn Exporters Association (BDYEA).
The rate of interest for borrowing from EDF is much low than the lending rate charge by local banks, said Zakir Hossain Chowdhury, deputy general manager of FEPD.
The authorised dealer could lend clients by borrowing from this new financing facility at the rate of LIBOR (London Inter-bank Offered Rate) plus 2.5 percent, which includes 1 percent for AD banks, he added.
Commercial banks’ lending rate is around 15 percent, which is one of the main challenges for the BTMA and BDYEA member mills to run manufactures and yield profits from export, Chowdhury said.
As per the EDF provision, the interest for borrowing by newly entitled industries from ADs will be as higher as 3 to 4 percent.
“Our objective is to raise exports by promoting local industries,” he said.
According to the FEPD circular, BTMA member mills will get loan for bulk import of raw cotton and other fibres against deemed exports.
BDYEA members will also get this loan for making bulk import of unprocessed yarn and chemicals for processing yarn for local deliveries to manufacturers-exporters against back-to-back LCs in foreign exchanges.
“The loan amount shall not exceed the value realised in foreign exchange against inland back-to-back LCs over the past twelve months or $ 15 million, whichever is lower,” reads the circular.
As usual, this limit will be applicable as single borrower exposure limit, it reads.
Other terms and conditions will follow the earlier circular issued on 22nd December 2009.
The FEPD official said borrowers will get a comfortable period of six months for repayment as per the EDF policy.
“Usually, exporters can mobilsie export receipts by six months,” he said.
BBN/MA/AD-24Sept14-2:50pm (BST)