Regulatory Alerts2024-01-18
Added
BRPD Circular No. 01: Opening Revenue Account for Project Finance in Related Banks
All scheduled banks operating in Bangladesh must ensure that for project loans, an Escrow Account or Revenue Account is opened in the lending bank (or lead bank for syndicated financing) in the project's name to collect project income or Sales Proceeds. Lending banks are required to supervise the deposit of these funds to ensure loan recovery. If project income exceeds the loan installment, an additional Revenue Account can be opened in another financial institution with a No Objection Certificate from the lending or lead bank. This instruction, issued under Section 45 of the Bank Company Act, 1991, is effective immediately.
Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh Website: www.bb.org.bd Banking Regulation and Policy Department BRPD Circular No. 01
18 January 2024 Date: ------------------- 04 Magh 1430
Managing Director/Chief Executive Officer All Scheduled Banks Operating in Bangladesh Dear Sir,
Regarding the obligation to open a project income account (Revenue Account) in the concerned bank for providing project loans
After banks provide loans for establishing projects in various sectors, an Escrow Account or Revenue Account is opened in the concerned bank to repay the funds/installments of the related project loan with the income or Sales Proceeds received from that project.
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Recently, it has been observed that some borrowers are not depositing the income from the project loan into the bank from which they obtained the project loan. As a result, on one hand, the risk of loan recovery for the lending bank is increasing, and on the other hand, the bank is unable to ensure proper loan monitoring.
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In the described context, to keep project loans provided by banks risk-free and to ensure proper monitoring of loan accounts, the following instructions shall be followed: (a) For project loans, an Escrow Account or Revenue Account (by whatever name called) must be opened in the name of the project in the concerned project lending bank to collect the income or Sales Proceeds of that project; (b) For project loans provided under syndicated financing, the said Escrow Account or Revenue Account must be opened in the lead bank to collect the project income or Sales Proceeds; (c) The lending bank must supervise the deposit of project income or Sales Proceeds into the said account to ensure loan recovery.
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If the project income or Sales Proceeds exceed the installment payable against the loan, an additional Revenue Account can be opened in another bank/financial institution in the name of the concerned project, subject to obtaining a No Objection Certificate from the lending bank or lead bank for depositing the excess portion of the income or Sales Proceeds.
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This instruction is issued under the power conferred by Section 45 of the Bank Company Act, 1991.
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This instruction shall be effective immediately.
Yours faithfully, (Mohammad Shahriar Siddiqui) Director (BRPD) Phone: 9530252