FAQ , Foreign Borrowing

How the investors can access to the short-term foreign loans?

Oct 11, 2021

How the investors can access to the short-term foreign loans? • Previously interest-free short-term borrowing from parent/affiliate companies are al- lowed. • Manufacturing industries are still allowed to avail the interest-free loans (one year) from overseas parent/ affiliate companies if urgently necessary.

Foreign owned industrial enterprises (engaged in manufacturing activities) are allowed to avail short-term foreign loans to fund working capital from overseas parent/ affiliate companies for maximum three years from the date of inception of manufacturing operation on conditions:

• Interest shall be payable in local currency (Taka) at the prevailing three-month Taka term deposit rate applicable by each authorized dealer (AD) bank,
• Repayment of principal and interest upon maturity shall be repatriated by converting local currency to the currency of loan-sourced country at the prevailing exchange rate. Further relaxation has been brought through the Foreign Exchange Circular No.4 (19 Jan. 2021) of Bangladesh Bank. The relaxation is applicable to:
• In addition to manufacturing industries, the short-term borrowing can be accessible by foreign owned companies engaged in service activities (except trading business),
• Such short-term borrowings can be admissible in convertible foreign currencies maximum for six years from the date of inception of manufacturing/ service activities.
• Borrowing companies may pay interest maximum at the rate of 3.0% per annum.

• Prior approval by Bangladesh Bank is not required neither for receipt nor to repay the loan. But borrowing companies have to report about obtaining and repaying the loan.