Dhaka, Bangladesh (BBN)– Country’s industrial enterprises are now allowed to enjoy 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 a prescribed form 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 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.

Talking to the BBN, a BB senior official said the central bank has included the regulations considering both the stakeholders including bankers’ advices and economic situation.

He also said it is not necessary to get Bangladesh Investment Development Authority (BIDA) approval for sanctioning such foreign currency loan. “It will help the country’s industrialisation process.”

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, according to a senior executive of a private commercial bank.

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 between 10 per cent and 15 per cent, according to the banker.

On the other hand, the industrial enterprises may easily borrow such foreign currency loans with paying below 6.0 per cent interest, he explained.

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 are 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.

Currently 36 commercial banks out of 59 are running their OBUs across the country and disbursed loans amounting to BDT 592.27 billion as of December 2018 as per a directive issued by the Banking Control Department of BB on December 17, 1985.