Play store
Bangladesh Bank has formed a Tk 2,000 crore pre-financing fund to support the production and processing of export-oriented frozen food, particularly shrimp and fish.
The fund, created from the central bank’s own resources, will have a three-year term and operate on a revolving basis, according to a circular issued by the Banking Regulation and Policy Department on August 30.
All scheduled banks operating in Bangladesh will be eligible to provide financing under the fund. Interested banks must sign a participation agreement with Bangladesh Bank’s Agricultural Credit Department-2.
Bangladesh Bank said the frozen food sector is one of the country’s major export-oriented industries, with significant potential to increase exports of frozen shrimp, fish, vegetables and ready-to-cook food products.
However, entrepreneurs in the sector face challenges including long cash-conversion cycles, high inventory costs, expensive cold-chain operations and limited access to low-cost financing.
The initiative aims to diversify exports, boost foreign exchange earnings, create employment and expand economic activity in rural areas.
The fund will finance the processing and export of frozen shrimp, fish and fish products and other frozen food items. Eligible activities include purchasing raw materials from farmers, production and collection, expansion and modernisation of factories, and procurement of machinery and equipment.
Financing will also be available for constructing cold-storage facilities, reopening closed or partially closed fish and food-processing plants, installing solar power systems for production, processing and storage, and meeting costs related to mitigating environmental impacts.
The maximum interest rate for borrowers has been set at 7 percent. Banks will not be allowed to charge customers any additional fees or charges beyond those specified in Bangladesh Bank’s schedule of charges. Banks will pay Bangladesh Bank interest at 4 percent on the pre-financing facility.
For establishing new frozen food-processing plants, a term loan of up to Tk 30 crore can be provided. For renovation, expansion and modernisation of existing plants, the maximum loan will be Tk 20 crore per project.
For solar power installations, an additional loan of up to Tk 5 crore, or 30 percent of the main project loan, whichever is lower, may be provided.
Loans for new factories may have a maximum tenure of seven years, including a grace period of up to one year. Loans for renovation, expansion and modernisation of existing facilities may have a maximum tenure of five years, including a grace period of up to one year.
Working capital loans will have a one-year tenure and may be renewed once if the borrower’s business transactions remain satisfactory. Through renewal, a borrower may receive financing under the fund for a maximum of two years.
According to Bangladesh Bank, loan defaulters or institutions classified as defaulters under the Bank Company Act, 1991, will not be eligible for the facility. Institutions already receiving financing from Bangladesh Bank or another government fund for the same purpose will also be ineligible for fresh financing under this fund.
Banks must assess borrowers’ risks, determine appropriate loan limits and ensure compliance with all relevant regulations before disbursing loans.
The lending banks will bear full responsibility for recovering loans from borrowers. Recovery of Bangladesh Bank’s dues cannot be linked to the recovery of loans from customers. If a bank fails to adjust the pre-financed amount, along with interest, within the stipulated period, it will have to pay an additional 2 percent interest.
Banks will also be required to regularly monitor the use of the fund. They must inspect beneficiary institutions or factories every three months and prepare reports. Bangladesh Bank may also inspect bank branches and borrowers’ factories or offices at any time.
Beneficiary institutions must take steps within the next two years to meet at least 15 percent of their electricity demand from solar power. They will also be required to take measures to reduce occupational health risks for employees and workers.
Bangladesh Bank said institutions failing to comply with these special conditions will be barred from receiving financing under the fund or any other Bangladesh Bank facility in the future.
Even after the fund expires, if any violation of conditions or misuse of loans is detected, Bangladesh Bank may recover the amount in a lump sum from the concerned bank’s current account, charging an additional 2 percent interest over the rate applied to the borrower.