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

Page 1/6 Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh website: www.bb.org.bd Banking Regulation and Policy Department-1 BRPD-1 Circular No. 15 Date: 30 July 2026 15 Shrabon 1433 Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh Dear Sir, Subject: Regarding the formation of a Pre-finance Scheme for the Growth and Development of the Leather and Leather Goods Industry Sector. There is an opportunity to meet the country's internal demand and earn a huge amount of foreign currency through exports by processing leather and producing leather goods. Despite the adequate supply of cattle hides in the country, this promising sector is not yielding sufficient utility due to the lack of proper collection, preservation, and processing of hides. Furthermore, the leather and leather goods industry is not playing an encouraging role in earning foreign currency because adequate measures have not been taken to ensure environmental compliance, including pollution control, and to obtain Leather Working Group (LWG) certification in leather processing. As a result, there is a need to develop this promising sector into a sustainable, eco-friendly, and competitive sector. Considering these issues, Bangladesh Bank has formed a Pre-finance Fund of BDT 2,000.00 (Two Thousand) Crore with the aim of producing international standard products, establishing eco-friendly factories, using advanced technology, meeting the country's demand for related products, earning foreign currency through exports, and creating employment in this sector. The following guidelines shall be followed in operating this fund: 2. Title: Pre-finance Scheme for the Growth and Development of the Leather and Leather Goods Industry. 3. Fund Amount and Source: BDT 2,000.00 (Two Thousand) Crore; Bangladesh Bank's own fund. 4. Participating Banks: All scheduled banks operating in Bangladesh shall be considered eligible to receive this pre-finance facility. Banks interested in receiving pre-finance must execute a Participation Agreement with the SME & Special Programs Department of Bangladesh Bank. 5. Fund Management: The operations/management/monitoring activities related to this fund shall be carried out by the SME & Special Programs Department, Bangladesh Bank, Head Office, Dhaka. 6. Fund Tenure: The tenure of the fund shall be 03 (three) years. The fund shall be revolving during this tenure. 7. Sectors: Loan facilities may be provided under this fund in the following sectors: (A) Construction/expansion of factory infrastructure and purchase of necessary machinery for tanning and leather goods production; (B) Collection and processing/production of leather and leather goods; (C) Construction of facilities and cold storage for preserving raw and processed leather;

Page 2/6 (D) Construction of necessary infrastructure to ensure environmental compliance, including the establishment of Effluent Treatment Plants, Dumping Yards, Sewage Treatment Plants (STP), solid waste management, and clean technology; (E) Other expenses for ensuring compliance to obtain Leather Working Group (LWG) certification; (F) Domestic production of chemicals for leather processing, various ancillary products for leather goods including shoes, and various accessories for the leather industry; and (G) Modernization of existing tanneries to improve the quality of processed leather. 8. Eligibility and Conditions for Loan/Investment at Customer Level: (A) Factories related to leather and leather goods production must have necessary clearances/approvals from local administration, Department of Inspection for Factories and Establishments, Department of Environment, and other relevant authorities; (B) Priority shall be given to raw hide processing establishments for loan disbursement under this fund; (C) If any institution is currently receiving loan facilities in local or foreign currency under any fund from Bangladesh Bank or the Government, including the Export Development Fund (EDF), Export Facilitation Pre-finance Fund (EFPF), Green Transformation Fund (GTF) for any sector mentioned in these guidelines, such institutions shall not be considered eligible for loan facilities from the current fund for the same sector; (D) Loan facilities may be provided under this fund to Type-B and Type-C establishments located in Export Processing Zones; (E) Before sanctioning loans, compliance with relevant rules and regulations for determining the eligibility limit and other matters must be ensured; (F) Exemption shall be granted from the obligation to provide a compromised amount against previously rescheduled loans under this fund; (G) Loan facilities shall not be provided under this fund to borrowers or borrower institutions identified as defaulters under the Bank Company Act 1991; (R) Loan facilities shall not be provided from the current fund to institutions involved in importing raw hides and crust and finished leather, with the aim of ensuring the maximum value for domestically sourced hides. 9. Loan Amount: (A) The loan-equity ratio for a borrower under this fund shall be a maximum of 70:30; (B) For establishing new tanneries for raw hide and skin processing, constructing/managing new industrial waste treatment plants, and constructing cold storage and other infrastructure for preservation, a maximum project term loan facility of BDT 30 (thirty) Crore may be provided to an institution under this fund; (C) For the repair, expansion, and modernization of existing tannery infrastructure, a maximum term loan facility of BDT 10 (ten) Crore may be provided under this scheme; (D) For the construction of new infrastructure for leather goods production, a maximum term loan facility of BDT 20 (twenty) Crore may be provided under this fund; (O) For the repair and modernization of existing leather goods factory infrastructure, a maximum term loan facility of BDT 10 (ten) Crore may be provided under this fund;

Page 3/6 (P) For working capital loan facilities under this fund, such as raw material purchase, salary and allowance payment, utility bill payment, etc., the limit shall be determined by the bank considering the institution's annual turnover. For new institutions, projected turnover must be considered. However, in no case shall this limit exceed BDT 30 (thirty) Crore; (Q) Only working capital loan facilities may be provided to institutions manufacturing auxiliary products for the leather and leather goods industry, with a limit not exceeding BDT 05 (five) Crore; (R) The policy regarding the Single Borrower Exposure Limit shall be duly followed for loan disbursement under this fund. 10. Fund Interest Rate: (A) The interest rate at the customer level shall be a maximum of 7%; (B) No other charges or fees shall be collected from the customer except for the charges/fees mentioned in the existing policy regarding the Schedule of Charges issued by Bangladesh Bank; (C) Banks must pay interest at a rate of 4% against the pre-finance fund received from Bangladesh Bank. 11. Nature and Tenure of Loan/Investment: (A) Term Loan/Investment: (1) Loans may be disbursed for a maximum tenure of 7 (seven) years (2 years + 5 years) including a maximum grace period of 2 (two) years, as per customer demand. This term loan shall be repaid in monthly/quarterly installments; (2) For the repair, expansion, and modernization of existing infrastructure, banks may disburse loans for a maximum tenure of 4 (four) years (6 months + 3.5 years) including a maximum grace period of 6 (six) months, as per customer demand. This loan shall be repaid in monthly/quarterly installments; (3) The interest accrued during the mentioned grace period shall be payable along with the loan installments upon completion of the entire grace period. (B) Working Capital Loan/Investment: Banks may provide working capital loans under this fund for a tenure of 1 (one) year. In this case, banks shall provide loans based on the banker-customer relationship as per prevailing rules and may renew it if business transactions are satisfactory. However, through renewal, no customer shall receive the declared facility under this fund for a maximum of 3 (three) years. 12. Loan/Investment Disbursement Method: (A) Loan/investment sanction under this fund must be made based on the customer's need and eligibility, following existing rules and the banker-customer relationship; (B) For term loans, banks may disburse the sanctioned loan in various installments (minimum 03) to ensure proper utilization of the loan. In this case, the installment amount must be a minimum of 03 (three); (C) Bangladesh Bank shall provide pre-finance to the concerned bank in a manner similar to the term loan installments provided by the bank to the customer. 13. Fund Availability: Bangladesh Bank, subject to compliance with its relevant rules and regulations, may decide to disburse loans/investments to a customer under its own policies. However, to receive benefits under this fund, the loan must be compulsorily approved by the Board of Directors of the concerned bank. Before sanctioning a loan/investment under the fund, the concerned bank may collect information regarding the availability of the fund from the fund managing department of Bangladesh Bank. After sanctioning the loan to the customer, the bank may submit an application for pre-finance under this fund. After Bangladesh Bank provides pre-finance, the bank shall disburse the loan to the concerned customer. The concerned bank may mention in the sanction letter to the customer that the interest rate and tenure mentioned in the policy shall apply subject to the receipt of pre-finance facility from Bangladesh Bank.

Page 4/6 14. Pre-finance Application Procedure: (A) After sanctioning a loan to a customer, the participating bank may apply for pre-finance facility to the Director, SME & Special Programs Department, Bangladesh Bank, Head Office, using Bangladesh Bank's prescribed form; (B) Bangladesh Bank shall provide pre-finance facility after verifying necessary information/documents, which shall be credited to the current account of the concerned bank; (C) The following documents/information must be submitted along with the application:

1. Loan proposal and related documents (due diligence documents such as: Board/Issuer memo, quotations, minutes, credit committee report, and other necessary documents in support of carrying out activities);
2. Loan sanction letter (with proof of customer consent);
3. Latest audited financial report of the concerned customer (where applicable);
4. Up-to-date CIB report of the customer;
5. A certificate signed by a bank officer stating that the bank has regularly examined and verified necessary approvals/clearances/no-objection certificates issued by the appropriate authority for production/factory operation in the concerned sector;
6. A commitment letter (DP Note) provided by the bank regarding the repayment of the applied funds for pre-finance within the stipulated time;
7. Relevant loan/investment disbursement schedule and repayment schedule; and
8. Any other necessary documents/proof requested by the SME & Special Programs Department. (D) The pre-finance application and its related annexures may be submitted/sent with the signature of the Managing Director/Chief Executive of the participating bank or an officer nominated by him. However, for the first submission with the signature of a nominated officer, an authorization letter with the sample signature of the concerned officer must be sent by the Managing Director/Chief Executive.

15. Deadline for Submitting Pre-finance Application: The application must be submitted to the SME & Special Programs Department, Bangladesh Bank, Head Office, within 15 (fifteen) working days after the participating bank sanctions the loan to the customer. For renewal of working capital loans under the fund, an application must be submitted to Bangladesh Bank at least 30 (thirty) days before expiry.
16. Collection: (A) The loan received by the bank for pre-finance shall be debited quarterly from the participating bank's current account maintained at Bangladesh Bank, along with interest, after calculating the grace period from the stipulated date and upon its completion. This date shall be determined considering the grace period in line with the repayment schedule attached to the fund availability application;

Page 5/6 (B) For working capital loans, interest shall be collected quarterly from the participating bank's current account, and the entire amount including remaining interest shall be collected at maturity; (C) All responsibility for collecting loans disbursed at the customer level shall rest with the loan disbursing banks. Bangladesh Bank's dues shall not be linked to customer loan collection. 17. Monitoring: (A) All loan-related risks shall be borne by the concerned bank, and the bank must ensure compliance with government policies related to industry, production, export, environment, etc.; (B) If the customer fails to repay the loan on time, it must be classified and provisions maintained as per existing policies; (C) Proper utilization of loans disbursed under the current pre-finance fund must be ensured through regular monitoring. Weekly Sales/Revenue Reports must be collected from beneficiary institutions. In addition, banks must visit the factory/office of the concerned institution quarterly and prepare a visit report; (D) Copies of any information, papers, and documents related to financing must be provided by the participating bank upon request from Bangladesh Bank from time to time; (E) If Bangladesh Bank deems it necessary, it may conduct inspection activities at bank branches and borrower factories/offices under this program at any time before or after pre-finance to ensure proper utilization of the loan; (F) Information and documents related to pre-finance under the fund must be properly preserved at bank branches for on-site verification by Bangladesh Bank; (G) If misuse of disbursed loans or violation of any condition mentioned in these guidelines is discovered at any time during or after the fund tenure, the re-financed amount shall be debited in a lump sum from the concerned bank's current account at an interest rate of customer rate + 2%. 18. Reporting/Submission of Reports: Information related to loan disbursement and collection shall be submitted quarterly, as per the form prescribed by the SME & Special Programs Department, by the 10th day of the month following the end of the concerned quarter, with the signature of the Managing Director/Chief Executive Officer of the participating bank or an officer nominated by him. 19. Other Conditions: (A) The balance of working capital loans taken under this fund cannot exceed the sanctioned loan limit. However, if it exceeds the sanctioned loan limit due to interest accrual or any other reason, the borrower shall repay/adjust it within 10 (ten) days after the end of each quarter. Otherwise, the bank may charge interest at the prevailing rate on the excess loan, and it shall not be considered a liability under the fund; (B) If a customer receives a loan under the pre-finance facility, all transactions of that customer must be conducted through the loan disbursing bank. For project loans, the instructions of BRPD Circular No. 01, dated 18 January 2024, regarding the obligation to open a project income account at the concerned bank, must be duly followed; (C) No existing loan account can be adjusted/repaid with loans taken under this fund; (D) In matters of borrower selection, loan facility sanction/disbursement, acceptance of necessary collateral, execution of loan-related documents, utilization of loans, and post-disbursement monitoring, the concerned bank shall follow its own risk management policies as well as Bangladesh Bank's directives and other existing laws and regulations;

Page 6/6 (O) To ensure proper utilization of the loan, the bank may appoint a representative of the concerned bank or, if necessary, any expert individual to the Board of Directors of the borrower institution to which financing facilities are provided. Written consent from the borrower institution regarding this matter must be obtained as a precondition for receiving a loan under the said fund. 20. Special Conditions: (A) Leather processing institutions must submit proof of obtaining Leather Working Group (LWG) certification to the concerned bank within 02 years of receiving the fund; (B) Beneficiary institutions under this fund must take necessary measures to source at least 10% of their electricity demand from solar power within the next 02 years; (C) Institutions must take necessary measures to mitigate occupational health risks for officers/employees/workers working in the concerned sector; and (D) If there is a failure to comply with the special conditions, the institution shall not be provided with loan facilities under this fund or any other Bangladesh Bank fund in the future. 21. Special Instructions for Islamic Shariah-based Investments: In the case of investments by Islamic Shariah-based banks and approved investments through Islamic banking methods of other banks, banks shall provide investment to customers under this fund based on their approved investment methods without violating the above conditions. In this case, financing facilities can be received from the fund through the pre-finance method determined by the SME & Special Programs Department. 22. Bangladesh Bank reserves the right to change/add/modify/refine the instructions related to this fund mentioned in this circular from time to time. 23. These instructions are issued under the powers granted by Section 45 of the Bank Company Act, 1991, and shall be effective immediately. Yours faithfully, (Ghazi Md. Mahfuzul Islam) Director (BRPD) Phone: 9530252