Pre-shipment credit refinancing relaxed to increase exports
The relaxation has been made to ease refinancing facilities at the bank and customer level, the Bangladesh Bank said
The central bank on Wednesday relaxed the loan terms of the pre-shipment credit refinancing for all export-oriented companies affected by the Covid-19 pandemic.
From now on, banks will be able to disburse up to 50% loan for packing credit, a loan provided to exporters or sellers to finance the goods procurement before shipment, under the pre-shipment credit refinancing scheme, the Bangladesh Bank said in a new circular issued on Sunday. There was no loan facility for packing credit under the incentive package previously.
The relaxation has been made to ease refinancing facilities at the bank and customer level, the Bangladesh Bank said.
According to the circular, any customer who has received the refinancing facility and has more than three overdue export bills will no longer be eligible for the fund. Previously, customers with more than two overdue export bills were considered ineligible.
Besides, under the previous terms, the interest rate for such loans at the customer level was 5%, of which the banks would get 1%. The new terms have lowered the interest rate to 3% at the customer level, of which banks will get 0.5%.
The new circular said all scheduled banks will be able to avail the benefits of the refinancing fund under the condition that they will have to sign a participation agreement with the central bank. However, the banks which already have such agreements signed will not need to renew them.
Speaking about the relaxation, a senior Bangladesh Bank official said refinancing facilities under the pre-shipment credit refinancing scheme have been much lower than the target for the current financial year. Hence, in a bid to meet the target and increase exports, exporters have been given more opportunities under the new conditions.
The central bank set up a special fund of Tk5,000 crore called a pre-shipment credit refinancing scheme on 26 April last year.
According to a Bangladesh Bank report, only Tk651 crore of the fund was disbursed till 13 April since July of the current fiscal year, amounting to only 13% of the target. Only 67 companies have availed the benefits.
