BB unveils Tk 3,000cr refinance scheme to diversify exports

In a circular issued by its Sustainable Finance Department, the central bank said the scheme aims to reduce product and market concentration risks stemming from Bangladesh's heavy reliance on RMG exports and support the growth of non-traditional export sectors.

The fund will be created from the excess liquidity of scheduled banks and operated as a revolving facility.

Under the scheme, Bangladesh Bank will provide refinancing to participating financial institutions (PFIs) at an interest rate of 4 percent, while exporters will be able to access funds at a maximum rate of 7 percent.

The financing facility will have a tenure of three years, including a grace period of up to six months. Interest will be calculated using the reducing balance method.

According to the central bank, the initiative is expected to strengthen export competitiveness, increase foreign exchange earnings, improve the trade balance and generate employment through the expansion of non-traditional export industries.

Financing will be available to industries listed under the "Highest Priority" and "Special Development" categories of the Export Policy 2024-27. Preference will be given to exporters using locally sourced raw materials, with sectors such as jute and leather identified as key drivers of export diversification.

However, exporters classified as loan defaulters in Credit Information Bureau (CIB) reports, those with overdue export proceeds and entities with a history of loan write-offs will be ineligible for financing.

Banks and financial institutions seeking to participate in the programme must sign a participation agreement with Bangladesh Bank's Sustainable Finance Department.

Islamic banks will also be allowed to extend financing through Shariah-compliant investment modes, provided they comply with the scheme's pricing and tenure requirements.

To obtain refinancing, PFIs must submit applications within 90 days of each disbursement, along with supporting documents, including demand promissory notes, letters of continuity, debit authority letters and updated CIB reports.

All investments financed under the scheme must maintain a minimum debt-equity ratio of 70:30.

The central bank has also introduced strict monitoring and accountability measures. PFIs will be required to submit quarterly reports within 15 days of the end of each quarter, while Bangladesh Bank will conduct regular inspections to ensure proper use of funds.

Under the penalty provisions, PFIs found providing false information or allowing misuse of funds will face an additional 5 percent penalty interest on top of the normal refinance rate. The amount will be recovered directly from the institution's current account with Bangladesh Bank.

The circular further states that if a borrower is classified as a defaulter, the concerned PFI must immediately notify the central bank. In such cases, Bangladesh Bank may recover the entire outstanding refinance amount through a one-time deduction from the institution's current account.

The scheme has been introduced under Section 45 of the Bank Company Act, 1991, as amended in 2023, and takes immediate effect.