BRPD-1 Circular No. 15: Pre-Finance Scheme for the Growth and Development of Leather and Leather Goods Industry Sector

Bank of Bangladesh
Chief Controller's Office
Motijheel, Dhaka-1000
Bangladesh.
Ref No.: BRPD-1
Banking Regulation and Policy Department-1
BRPD-1 Circular No.-15
July 30, 2026
Date: -----------------
15 Srabon 1433
Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh
Dear Sir,
Regarding the formation of the Pre-Finance Scheme (Pre-Finance Scheme) for the development and growth of the Leather and Leather Goods Industry.
There is an opportunity to earn substantial foreign exchange through exporting to international markets as well as meeting domestic demand through leather processing and leather goods production. Despite adequate supply of cattle hides in the country, it is not possible to derive full benefit from this promising sector due to lack of proper collection, storage, and processing of leather. Furthermore, since necessary measures have not been taken to comply with international standards such as the Leather Working Group (LWG) Certificate along with preventing environmental pollution in leather processing, the leather and leather goods industry is not playing its expected role in earning foreign exchange. Therefore, there is a need to develop this promising sector into a sustainable, environmentally friendly, and competitive sector. Considering these matters, Bangladesh Bank has established a pre-finance fund of $2,000.00 (Two Thousand) Crore Taka with the aim of producing internationally standard products, establishing environmentally friendly factories, using advanced technology, fulfilling domestic demand for related products, earning foreign exchange through exports, and creating employment in this sector. The following guidelines will be followed for the management of this fund:

2. Title: Pre-Finance Scheme for the Development and Growth of the Leather and Leather Goods Industry.

3. Fund Amount and Source: $2,000.00 (Two Thousand) Crore; Own fund of Bangladesh Bank.

4. Participating Banks: All scheduled banks operating in Bangladesh will be considered eligible to avail this pre-finance facility. Banks interested in availing the pre-finance must enter into a Participation Agreement with the SME and Special Programs Department of Bangladesh Bank.

5. Fund Management: Management/Supervision/Monitoring activities related to this fund will be carried out by the SME and Special Programs Department, Bangladesh Bank, Chief Controller's Office, Dhaka.

6. Tenure of the Fund: The tenure of the fund will be 03 (three) years. The fund will be renewable during said tenure.

7. Sector: Loan facilities under this fund may be provided in the following sectors:
   (a) Construction/expansion of factory infrastructure and purchase of necessary machinery/equipment for the production of tannery and leather goods; (b) Collection and processing/production of raw leather and leather goods; (c) Construction of buildings and cold stores (Cold Storage) for the preservation of raw and processed leather; (d) Construction of necessary infrastructure to ensure environmental issues including installation of Effluent Treatment Plant (ETP), Incinerator, Common Effluent Treatment Plant (CETP), Solid Waste Management, and Clean Technology for waste management purposes; (e) Other costs to ensure compliance for obtaining Leather Working Group (LWG) Certificate; (f) Domestic production of chemical intermediates required for leather processing, various auxiliary products of leather goods including footwear, and various inputs for the leather industry; and (g) Modernization of existing tanneries for the improvement of quality of processed leather.

(h) [Note: Item (d) continues here in original text structure but listed above]

8. Customer Eligibility and Conditions for Receiving Loans/Investments:
   (a) It is mandatory to have necessary permissions/approvals from local administration, Department of Factories, Department of Environment, and other relevant authorities for establishing factories related to leather and leather goods; (b) Priority should be given to distributing loans under this fund to institutions processing raw leather; (c) If any institution has any ongoing loan facility in local or foreign currency under any fund from Bangladesh Bank or Government such as Export Credit Refinance Facility (ECRF), Export Oriented Pre-Finance Fund (EOPF), Green Transformation Fund (GTF), etc., in any sector mentioned in this guideline, such institutions will not be considered eligible to receive loan facilities from the discussed fund in the same sector; (d) Loan facilities under this fund may be provided to Type-B and Type-C units located in Export Processing Zones; (e) Compliance with relevant rules and regulations regarding determination of borrowing limit against loan demand and other matters before sanctioning loans must be ensured; (f) Institutions will be exempted from the obligation to provide compromised amounts against previously rescheduled loans when providing loan facilities from this fund; (g) Loan facilities under this fund cannot be provided to borrowers or borrower institutions identified as defaulters according to the Companies Act 1991; (h) To ensure the highest price of domestically sourced leather, loans cannot be provided from the discussed fund to institutions involved in the import of Raw Hides and Skins (Raw Hides & Skins).

9. Loan Amount:
   (a) The loan-to-equity ratio for a single borrower under this fund will be maximum 70:30; (b) For establishing new tanneries for processing raw leather (Raw Hides & Skins), constructing/managing new industrial effluent treatment plants, building cold stores for preservation, and other infrastructure construction, a total maximum project-term loan facility of 30 (Thirty) Crore Taka can be provided to any institution under this fund; (c) For repair, expansion, and modernization of existing tannery infrastructure, a maximum term loan facility of 10 (Ten) Crore Taka can be provided under this scheme; (d) For constructing new infrastructure for leather goods industries, a maximum term loan facility of 20 (Twenty) Crore Taka can be provided under this fund; (e) For repair and modernization of existing infrastructure of leather goods product factories, a maximum term loan facility of 10 (Ten) Crore Taka can be provided under this fund;

(f) In cases of working capital loan facilities for purchasing raw materials, paying salaries/benefits, paying utility bills, etc., under this fund, the bank will determine the limit considering the annual turnover of the institution. For new institutions, projected turnover should be considered. However, in no case will this limit exceed 30 (Thirty) Crore Taka; (g) Working capital loan facilities can only be provided to institutions producing auxiliary products for the leather and leather goods industry, with a limit not exceeding 05 (Five) Crore Taka; (h) Regarding the maximum limit of loan facilities for a single customer or group (Single Customer or Group Exposure) in the distribution of loans under this fund, the relevant guidelines will be followed as usual.

10. Interest Rate of the Fund:
    (a) The customer-facing interest rate will be maximum 7%; (b) Except for charges/fees specified in the existing guidelines regarding Schedule of Charges issued by Bangladesh Bank, no other type of charge or fee can be collected from the customer; (c) Banks must pay interest at a rate of 4% on the pre-finance fund taken from Bangladesh Bank.

11. Nature and Tenure of Loan/Investment:
    (a) Term Loan/Investment:
    (1) Loans can be distributed over a maximum tenure of 7 (seven) years (2 years + 5 years) with a maximum grace period of 2 (two) years according to customer demand. This term loan will be repaid in monthly/tri-monthly installments; (2) For repair, expansion, and modernization of existing infrastructure, banks can distribute loans over a maximum tenure of 4 (four) years (6 months + 3.5 years) with a maximum grace period of 6 (six) months according to customer demand. This loan will be repaid in monthly/tri-monthly installments; (3) Interest accrued during the aforementioned grace period will be payable along with the loan installments upon completion of the entire grace period. (b) Working Capital Loan/Investment: Banks can provide working capital loans under this fund for a tenure of 1 (one) year. In this regard, banks will provide loans based on banker-customer relationship according to prevailing rules and can renew them if business transactions are satisfactory. However, no customer will avail benefits declared under this fund for more than 3 (three) years through renewal.

12. Method of Loan/Investment Distribution:
    (a) Loan/investment under this fund must be sanctioned based on banker-customer relationship after complying with existing rules and regulations considering customer needs and eligibility; (b) In the case of term loans, banks can distribute the sanctioned loan in various installments ensuring proper utilization of the loan. In this regard, the number of installments must be minimum 03 (three); (c) Correspondingly to the installments of the term loan payable to the customer by the bank, the relevant bank will be pre-financed by Bangladesh Bank.

13. Fund Availability: Subject to compliance with relevant rules and regulations of Bangladesh Bank, banks may take decisions to distribute loans/investments to any customer under their own guidelines. However, to avail benefits under this fund, the loan must necessarily be approved by the Board of Directors of the relevant bank. Before granting loans/investments under this fund, the relevant bank may collect information regarding fund availability from the fund management department of Bangladesh Bank. After sanctioning loans to customers, the bank may apply for pre-finance under this fund. After pre-finance is granted by Bangladesh Bank, the bank will distribute loans to the relevant customers. The interest rate and tenure specified in the guideline will be applicable subject to receiving pre-finance benefits from Bangladesh Bank, and the relevant bank may mention the percentage thereof in the sanction letter provided to the relevant customer.

14. Method of Applying for Pre-Finance:
    a) After sanctioning loans to customers, participating banks may apply to the Director, SME and Special Programs Department, Bangladesh Bank, Chief Controller's Office for pre-finance benefits using the prescribed form; b) Pre-finance benefits will be provided by Bangladesh Bank after verifying necessary information/documents, which will be credited to the current account of the relevant bank; c) The following documents/information must be submitted with the application form:

1. Loan proposal and related documents (Due diligence related documents such as: Board/EC Memo, Quotation, Project Report, Credit Committee Report, and other necessary documents proving completion of work);
2. Loan Sanction Letter (with proof of relevant customer consent);
3. Latest Audited Financial Reports of the relevant customer (where applicable);
4. Updated CIB Report of the customer;
5. Certification signed by the bank officer stating that necessary approvals/permissions/no-objection certificates issued by relevant authorities for production/factory operation in the relevant sector have been examined and verified by the bank as per rules;
6. Undertaking letter provided by the bank regarding payment of the determined amount within the determined time for pre-finance (DP Note);
7. Disbursement schedule and repayment schedule of the relevant loan/investment; and
8. Any other necessary document/certificate verified by the SME and Special Programs Department.
   d) The pre-finance application form and related attachments may be submitted/sent with the signature of the Managing Director/Chief Executive of the bank that has signed the participation agreement, or an authorized officer appointed by them. However, in case of submission with the signature of the first-time appointed officer, an Authorization Letter must be sent by the Managing Director/Chief Executive along with the specimen signature of the relevant officer.

15. Time Limit for Submitting Application for Pre-Finance: Participating banks must submit applications to the SME and Special Programs Department, Bangladesh Bank, Chief Controller's Office within 15 (fifteen) working days after sanctioning loans to customers. In case of renewal of working capital loans under the fund, applications must be made to Bangladesh Bank at least 30 (thirty) days before maturity.

16. Recovery:
    a) After the loan taken by the bank for pre-finance is deposited in the current account of the participating bank kept with Bangladesh Bank, it will be recovered tri-monthly along with interest from said account starting from the determined date, calculating the grace period until its completion. The said date will be determined considering the grace period in coordination with the repayment schedule attached with the application for fund availability; b) In the case of working capital loans, interest will be recovered tri-monthly from the current account of the participating bank, and all remaining principal and interest will be recovered at maturity; c) All responsibilities for recovering loans distributed to customers lie with the loan-distributing banks. Bangladesh Bank's receivables cannot be linked with the recovery of loans to customers.

17. Supervision:
    a) All risks related to loans must be borne by the relevant bank, and the bank must ensure compliance with government policies on industry, production, export, environment, etc.; b) If the customer defaults on timely loan repayment, it must be classified and provisions reserved according to existing guidelines; c) Regular monitoring must be ensured through regular monitoring of the proper utilization of loans distributed by banks under the discussed pre-finance fund. Weekly updates on Production/Stock status of benefited institutions must be collected from the customer. Furthermore, banks must conduct factory/office inspections of the relevant institutions tri-monthly and prepare inspection reports; d) Copies of any information, papers, and documents related to authorization must be supplied by participating banks from time to time upon request by Bangladesh Bank; e) If Bangladesh Bank deems necessary, it may conduct inspection activities at bank branches and borrower factories/offices under this scheme at any time before or after pre-finance to ensure proper utilization of loans; f) Information and documents related to pre-finance under the fund must be properly preserved at bank branches for Bangladesh Bank's on-site verification; g) If it is discovered during or after the tenure of the fund that the distributed loans were not used properly or any condition specified in this guideline was violated, the amount returned as re-authorization will be recovered immediately from the current account of the bank at the rate of Customer Rate + 2% interest.

18. Reporting/Submission of Reports: The Managing Director/Chief Executive of participating banks or their appointed officers must submit information regarding loan distribution and recovery tri-monthly to the SME and Special Programs Department in the format prescribed by them by the 10th of the following month at the end of each quarter.

19. Other Conditions:
    a) The balance of the working capital loan account taken under this fund must not exceed the sanctioned loan limit. However, if it exceeds the sanctioned loan limit due to interest accrual or any other reason, the borrower will repay/adjust it within 10 (ten) days after the end of each quarter. Otherwise, the bank may impose interest at the prevailing rate on the excess loan liability, and it will not be considered as liability under this fund; b) If any customer takes a loan under the pre-finance benefit, all transactions of said customer must necessarily be conducted through the loan-distributing bank. Regarding the obligation to open project income accounts in the relevant bank in case of project loans, instructions issued in BRPD Circular No.-01, Date: January 18, 2024, must be followed appropriately; c) Existing loan accounts cannot be adjusted/paid off using loans taken under this fund; d) Relevant banks will follow their own risk management policies alongside Bangladesh Bank's instructions on borrower selection, loan facility sanction/distribution, necessary collateral collection, execution of loan-related documents, proper utilization of loans, and post-disbursement supervision, as well as existing laws and regulations;

e) To ensure proper utilization of loans, banks may appoint a representative of the relevant bank or any expert person to the Board of Directors of the institution to which authorization benefits are provided. Written consent of the borrower institution must be obtained beforehand as a precondition for taking loans under this fund.

20. Special Conditions:
    a) Within 02 years from the date of receiving loans under the fund, leather processing institutions must submit proof of obtaining Leather Working Group (LWG) Certification to the relevant bank; b) Beneficiary institutions under this fund must take necessary measures within the next 02 years to source at least 10% of their electricity demand from Solar Power sources; c) Institutions must take necessary measures to eliminate professional health risks of officers/employees/workers engaged in the discussed sector; and d) If special conditions are violated, subsequent loan facilities will not be provided to said institutions under this fund or any other fund of Bangladesh Bank.

21. Special Instructions for Islamic Shariah-based Investments: Banks operating on Islamic Shariah basis and investments approved through Islamic banking methods of other banks will provide investments to customers under this fund based on their approved investment methods without deviating from the aforementioned conditions. In this regard, authorization benefits can be taken from the fund through the pre-finance method prescribed by the SME and Special Programs Department.

22. Bangladesh Bank reserves the right to change/amend/add/rearrange instructions regarding the fund mentioned in this circular from time to time.

23. These instructions are issued under the powers conferred by Section 45 of the Companies Act, 1991, and will come into force immediately.

Yours faithfully,
(Gazi Md. Mahfuzul Islam)
Director (BRPD)
Phone: 9530252