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Bangladesh Bank has tightened eligibility for Export Development Fund (EDF) loans, barring companies from the facility if bills for local supplies against back-to-back letters of credit (LCs) remain unpaid for more than 270 days.
The Foreign Exchange Policy Department issued a circular on Wednesday, September 17, instructing all authorised dealer (AD) banks to follow the new requirement.
Under the latest directive, AD banks must verify the outstanding position of deemed exporters or local suppliers before forwarding applications for EDF financing.
Bangladesh Bank said the decision was taken to align two existing directives. An FEPD-1 circular issued on July 23 requires AD banks to check outstanding liabilities of local suppliers before submitting EDF loan applications. Meanwhile, an August 13 directive allows back-to-back import LCs on a usance basis for up to 270 days.
Under the new instruction, AD banks must ensure that bills for local supplies against back-to-back LCs have not remained overdue for more than 270 days before providing EDF financing to eligible manufacturers for bulk imports.
Therefore, an exporter or manufacturing company with local-supply bills outstanding for more than 270 days against back-to-back LCs will not be considered for EDF financing for bulk imports.
Bangladesh Bank said all other provisions governing EDF loans will remain unchanged. The other instructions contained in FEPD-1 Circular No. 24 issued on July 23 will continue to apply.