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Bangladesh Bank has given the relaxation considering the current situation due to the Covid-19 pandemic
Bangladesh Bank has relaxed its policy for the foreign owned and controlled companies, which are operating in the country, allowing banks and non-bank financial institutions (NBFIs) to issue credit to the entities in local currency against foreign guarantees.
“Given the ongoing situation due to the Covid-19 pandemic, it has been decided that banks and NBFIs may extend admissible taka finance to resident companies irrespective of ownership or controlling status against overseas guarantees in the form of bank guarantees and standby letters of credit (LCs),” as per a central bank circular issued on Tuesday.
For issuing credit to such entities, the guarantee that would be provided by the borrowers must be acceptable to the lending banks and NBFIs. No fees can be paid against the guarantee, the circular said.
Officials of the banks said the new policy waiver would help foreign owned or controlled companies to avail loans against payment guarantees from their parent companies abroad.
A high-level official of the central bank said the relaxation was introduced by the central bank to facilitate companies’ easy access to loans against external guarantees.
Bangladesh Bank has given the relaxation considering the current situation due to Covid-19, he said.
The facilities will be applicable till June 2021.
The circular also said in case of lending by NBFIs, the guarantees should be issued by local banks issued against back to back foreign guarantees.
Foreign exchange regulations allow banks and NBFIs to extend loans in local currency taka to foreign owned or controlled companies.
However, banks and NBFIs need permission from Bangladesh Bank to extend loans to borrowers against overseas guarantees or collateral regardless of ownership or controlling status of borrowing entities.
(DT)
