BRPD Circular No. 08: Refinance Scheme for Pre-Shipment Credit to Mitigate the Crisis due to Novel Corona Virus

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. Ref No: BRPD-08 18 May 2022 BRPD Circular No. 08 Date: ------------------ 04 Jyestha 1429 Managing Director / Chief Executive All Scheduled Banks operating in Bangladesh.

Dear Sir,

Regarding the Refinance Scheme for Pre-Shipment Credit to Mitigate the Crisis due to Novel Corona Virus.

1. Attention is drawn to BRPD Circular No. 09 dated 13 April 2020, BRPD Circular Letter No. 38 dated 22 July 2020, BRPD Circular Letter No. 42 dated 23 August 2020, BRPD Circular Letter No. 26 dated 26 April 2021, BRPD Circular Letter No. 44 dated 30 September 2021, SFDC Circular No. 01 dated 22 April 2020, and SFDC Circular Letter No. 04 dated 27 August 2020, issued by the Banking Regulation and Policy Department and Sustainable Finance Department respectively.

2. Through the aforementioned circulars and circular letters, the policy for the 5,000 (Five Thousand) Crore Taka refinance fund established by Bangladesh Bank was issued to provide pre-shipment loan assistance to export-oriented industrial units affected by the COVID-19 pandemic, thereby keeping their export activities ongoing and ensuring the flow of foreign exchange. Now, to further facilitate the benefit of refinance for banks and customers, the said policy is amended/modified, and the amended policy is given below:

3. Title: Pre-Shipment Credit Refinance Scheme.

4. Amount and Source of Fund: 5,000 (Five Thousand) Crore Taka; Own fund of Bangladesh Bank.

5. Sector: This loan will be distributed in the pre-shipment sector of any locally produced export-oriented industry.

6. Participating Banks: All scheduled banks operating in Bangladesh will be considered eligible to avail the benefit of the said refinance fund. Banks interested in availing refinance must enter into a Participating Agreement with the Sustainable Finance Department, Bangladesh Bank. Banks that have already entered into a Participating Agreement under this fund are not required to enter into a new agreement.

7. Fund Management: The overall supervision/management/administration of this fund will be carried out by the Sustainable Finance Department, Bangladesh Bank, Head Office. In the matter of fund management and during the approval of refinance, the Sustainable Finance Department may issue instructions to banks to follow necessary policies.

8. Tenure of Fund: The tenure of the fund under this scheme is from 13 April 2020 to 05 (Five) years. The fund is recoverable (non-performing) within the mentioned period.

9. Customer Eligibility for Loan Receipt: a) This fund will remain open for approval in favor of any exporter or export-oriented institution; b) The approving bank may distribute loans based on the bank-customer relationship while following existing rules and regulations; c) No loan will be provided to any defaulter customer or customer institution as per the relevant section of the Companies Act 1991; d) If the customer fails to realize the export/shipment value for three consecutive export shipments while availing the refinance benefit under this fund, the relevant exporter will not be entitled to any further benefit under this fund; e) Refinance benefit under this fund will not be provided against pre-shipment loans given against LC orders of LC companies/institutions or against export credit letters of LC banks.

10. Customer Interest Rate (Profit in case of Islamic Shariah-based banks) and Other Charges: a) The customer interest rate will be maximum 3.5%; b) No other type of charge or fee will be collected from the customer except charges/fees specified in the Schedule of Charges issued by Bangladesh Bank.

11. Bank Interest Rate: Interest will be levied at the rate of 0.5% (zero point five percent) on the refinance benefit taken by banks from Bangladesh Bank.

12. Amount of Refinance against Pre-Shipment Credit: a) Participating banks will provide pre-shipment credit based on the bank-customer relationship on the remaining value after deducting the value of back-to-back letters of credit and other approved authority from the value of each confirmed export order/export credit letter (Confirmed Export Order/Confirmed Export Letter); b) Subject to the availability of necessary balance in the refinance fund, the amount equivalent to the pre-shipment credit provided by the bank in favor of the customer will be considered for refinance approval; c) Participating banks must compulsorily distribute at least 50% of the maximum limit of eligibility for packing credit as pre-shipment credit in favor of any customer while following existing rules and regulations, which will be considered for obtaining refinance under this fund.

13. Loan Tenure: a) A customer may be distributed loans under this refinance fund multiple times with different tenures within the tenure of the fund for 05 (Five) years; b) Regardless of the tenure of the customer loan, refinance benefit will be provided to participating banks by Bangladesh Bank with a maximum tenure of 180 days (Six months), which must be repaid in a lump sum along with interest at the end of the tenure.

14. Application Procedure for Refinance: a) The relevant bank may apply for refinance to the Chief Manager, Sustainable Finance Department, Bangladesh Bank, Head Office, on a weekly basis in the format prescribed by the Sustainable Finance Department, during the week following the distribution of the loan to the customer. However, if the application for refinance is not submitted during the week following the distribution of pre-shipment credit for any reason, the application may be submitted within the next 15 (Fifteen) days by mentioning the appropriate reason; b) The following documents/information must be submitted with the application: i. Approval letter regarding loan distribution; ii. Copy of the relevant export order/export credit letter; iii. Updated CIB report of the relevant customer; iv. Undertaking letter provided by the bank regarding the repayment of the amount applied for refinance within the prescribed time; v. Letter of Continuity; vi. Letter of Debit Authority; vii. Necessary information as per the format prescribed by the Sustainable Finance Department (if any). c) The refinance application and its annexures must be submitted/sent with the signature of the Managing Director/Chief Executive of the participating bank or a committee nominated by them. However, in the case of submission with the signature of the first nominated committee, an authorization letter with the specimen signature of the relevant committee must be sent by the Managing Director/Chief Executive.

15. Payment and Supervision: a) The loan taken by the bank for refinance will be recovered in a lump sum from the current account of the participating bank kept with Bangladesh Bank, 180 days after the date of payment; b) All responsibilities for the recovery of loans distributed to customers will remain with the lending banks. The claim of Bangladesh Bank will not be linked with the recovery of customer loans or realization of export value; c) The relevant bank will bear all risks related to the loan, and the bank must ensure compliance with the government's export and production policies; d) If the customer defaults on loan repayment on time, it must be classified according to existing policies and provisions must be maintained; e) The relevant bank must ensure the proper use of loans distributed under the said refinance fund. If misuse of distributed loans is discovered during the tenure of the fund or at any later time, the amount provided for refinance will be recovered in a lump sum from the current account of the relevant bank at bank rate along with interest; f) The relevant information and documents regarding refinance under the fund must be kept separately at the bank branch for verification by Bangladesh Bank from time to time through spot checks.

16. Reporting/Submitting Reports: The Managing Director/Chief Executive Committee of the participating bank or a committee nominated by them must submit information regarding loan distribution and recovery on a quarterly basis in the format prescribed by the Sustainable Finance Department to the Chief Manager, Sustainable Finance Department, Bangladesh Bank, within the next 15 days of the end of the relevant quarter, i.e., on or before 15 April, July, October, and January based on March, June, September, and December reports respectively.

17. Other Conditions: a) The policy regarding the maximum limit of loan facility (Single Customer/Group Exposure) for a single customer or group in the matter of loan distribution under this fund will remain applicable; b) The selection of borrowers, loan approval, distribution, documentation, debt-equity ratio, proper use of loans, and supervision will be determined based on the own rules and regulations of the lending bank and the bank-customer relationship; c) Bangladesh Bank reserves the right to add, delete, and modify the percentage of refinance benefit in the mentioned sector.

18. Furthermore, the instructions of BRPD Circular No. 09/2020, BRPD Circular Letter No. 38/2020, BRPD Circular Letter No. 42/2020, BRPD Circular Letter No. 26/2021, BRPD Circular Letter No. 44/2021, SFDC Circular No. 01/2020, and SFDC Circular Letter No. 04/2020 issued earlier are hereby revoked. Notwithstanding the revocation, programs previously taken under the revoked circulars/circular letters will be considered as done or taken under this circular.

19. Necessary modified details/formats will be provided by the Sustainable Finance Department to the bank that has entered into the refinance agreement or is interested in availing the refinance benefit, along with the Participating Agreement, for the implementation of various instructions contained in this circular.

20. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991. These instructions will come into force immediately.

Yours faithfully,

(Maksuda Begum) Chief Manager Phone: 9530252