Bangladesh Bank eases rules for foreign loans in private sector

Bangladesh Bank has further relaxed the rules for the private sector to source foreign loan.

The new rule requires no central bank approval for guarantees other than bank guarantee to take foreign loans.
 
Corporate guarantee, individual guarantee and third-party guarantee would not require the financial regulator’s approval.
 
The central bank issued a circular to this effect on Wednesday.
 
"Bangladesh Bank’s approval will not be needed for the guarantees by the loan receivers on behalf of foreign lenders including corporate guarantee, individual guarantee and third party guarantee," the circular said.
 
It earlier withdrew the approval requirement for appointing caretaker for bond caretaking service on behalf of foreign lenders.
 
For the last several years, Bangladesh Bank has been providing the private sector with the scope for taking loans from abroad in order to create a competitive market to cut interest rate on bank loans.
 
The Board of Investment processes the application for such loans.
 
A high-level committee, led by the central bank governor, approves the loan applications. 
 
The committee approved a host of companies to take loans amounting to some Tk 10 billon in the last five years.
 
The interest rate of such loans is generally up to six percent.
 
Latest central bank data shows the average interest rate on loans taken from the banking sector is 11.88 percent.
 
A lot of fund has remained idle in the banks.
 
The banks say the money is not being invested due to the lack of good entrepreneur or project.