EDF alternative: Tk10,000 crore fund to be operated through 49 banks

Bangladesh Bank (BB) on Monday signed a Participation Agreement with 49 banks to ensure adequate liquidity for the export-oriented sector.


Earlier the central bank formed ‘The Export Facilitation Pre-financing Fund (EFPFA)’ of Tk10,000 crore to assist the export sector amid the slowdown of global economic growth. The entrepreneurs can borrow from this fund for an interim period before getting foreign buyers’ payment against the order.


From the newly constituted fund of Tk10,000 crore, exporters will be given loans in local currency. After taking loans in taka, they (exporters) can convert them into foreign currency and open an LC. As a result, it will act as an alternative fund to the export development fund (EDF), where exporters get loans in foreign currency, acting as a drag on the country’s forex reserves.


It drew attention after the IMF insisted the EDF of USD $7 billion be counted as encumbered reserves – not as part of the country’s liquid foreign exchange reserve.


The executive director and spokesperson of BB Mesbaul Haque told UNB that Governor Abdur Rauf Talukdar had a meeting with the MDs of the banks on Monday. Separate deals were signed with 49 banks in the meeting.


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As per the deal, banks will be able to borrow from this fund at 4 percent interest rate, he said.


After the meeting, Chairman of Association of Bankers, Bangladesh (ABB) and Managing Director of BRAC Bank Salim RF Hossain said that the banks will benefit through the formation of the fund in local currency.


“We applaud this initiative. We have entered into an agreement with the central bank to avail loans from the Export Facilitation Pre-financing Fund,” he said.


After receiving the export work order from the buyer, entrepreneurs will be given loans from this fund to import the required raw materials for the exporting sector. Loans will be given from this fund at a maximum interest of 4 percent.


In respect of this loan, no fee or commission can be collected in excess of the charge or commission fixed by the central bank.


Source: United News of Bangladesh