Rules eased for fully foreign-owned firms to get foreign loan

Bangladesh Bank has relaxed regulations governing foreign borrowing by fully foreign-owned companies, allowing them easier access to low-cost short-, medium-, and long-term financing from their parent companies, affiliates, and shareholders.

The central bank issued a circular on Wednesday outlining the new policy, which is expected to reduce procedural hurdles and make Bangladesh a more attractive destination for foreign investment.

Under the revised rules, fully foreign-owned manufacturing and service companies operating in Export Processing Zones (EPZs), Economic Zones (EZs), Hi-Tech Parks, other specialized zones, as well as those located outside these areas, will be eligible for the new financing facilities.

For short-term loans with maturities of less than one year, companies outside specialized zones can now obtain interest-free working capital loans without prior approval from Bangladesh Bank. They may also secure interest-bearing loans for business purposes, including raw material imports, at an annual all-in cost of up to 3 percent. These loans must be repaid in a lump sum at maturity but can be rolled over for up to three years.

The central bank has also introduced new provisions for medium-term financing. Companies will be allowed to obtain interest-free loans of up to $50 million for capital expenditures such as machinery, equipment, and construction projects with repayment periods ranging from one to five years. They can also borrow up to $5 million in interest-bearing loans under the same category.

For long-term financing exceeding five years, firms will also be eligible to borrow from their parent companies and related entities, with the interest rate capped at 3 percent annually where applicable.

Another significant feature of the revised policy is the option to convert outstanding foreign loans into equity, offering companies greater financial flexibility.

Industry insiders said the relaxed regulations eliminate the need for fully foreign-owned companies to wait for approval from the Bangladesh Investment Development Authority (BIDA) before accessing such foreign financing.

Previously, only short-term borrowing was generally permitted. The new framework extends financing options to medium- and long-term loans while reducing regulatory procedures and lowering financing costs, which in some cases could be close to zero. They also noted that if such loans cannot be repaid, they may now be converted into equity under the new rules.