Regulatory Alerts2022-11-08
Added · Updated
SMESPD Circular Letter No. 07: Regarding ease of policy for disbursement of loan/investment under 25000 crore refinance scheme in CMSME sector
The Bangladesh Bank amends paragraphs 2.4(a) and 2.4(b) of SMESPD Circular No. 04 to expand the refinancing scheme's eligibility to include working capital loans and investments for the trading sector, alongside production and services. The revised rules permit up to 40% of refinancing to be allocated to working capital, provided it is not used for hoarding, and require banks to allocate at least 65% of total disbursements to production and services and no more than 35% to trading. This policy adjustment aims to address increased financing needs in the CMSME sector caused by the Russia-Ukraine war and global inflation.
Bangladesh Bank
Head Office Motijheel, Dhaka-1000 Bangladesh. www.bb.org.bd
SME & Specialized Department
Kartik 23, 1429 Date: November 08, 2022
SMESPD Circular Letter No.-07
Managing Director/Chief Executive All Scheduled Banks and Financial Institutions operating in Bangladesh
Regarding ease of policy for disbursement of loan/investment under 25000 crore refinance scheme in CMSME sector.
Reference is drawn to your attention to SMESPD Circular No.-04 issued on July 19, 2022, on the subject cited above.
02. To make national economic growth more resilient through the creation of a large number of jobs in the import substitution production and service sectors, a refinance scheme named "Refinance against Term Loan in CMSME Sector" with a total amount of 25,000 (Twenty-Five Thousand) Crore Taka was launched to ensure timely loan facilities at relatively lower interest rates and easier terms to the country's Cottage, Micro, Small and Medium (CMSME) entrepreneurs.
03. Due to the ongoing Russia-Ukraine war and the upward trend of global price hikes, entrepreneurs in the CMSME sector of Bangladesh are also facing widespread new losses. To maintain the momentum of the country's economy, there is an increasing demand for term loans/investments as well as working capital loans/investments for various timely activities by entrepreneurs, and it is observed that various banks and financial institutions need to finance their customers to meet such demands. In the context of a significant increase in the demand for loans/investments in both the production sector and the business (Trading) sector, the instructions mentioned in paragraphs 2.4(a) and 2.4(b) of the aforementioned circular are hereby replaced as follows:
Paragraph Number 2.4(a): "Term loans/investments granted to Cottage, Micro, Small and Medium entrepreneurs defined under SMESPD Circular No.-02/2019 will be considered eligible for refinancing under this scheme. In addition, term loans/investments granted/grantable in the production, service, and business sectors, as well as loans/investments distributed as working capital, will also be considered eligible for refinancing under this scheme, keeping in mind the demand of entrepreneurs in the relevant sectors. However, no bank or financial institution will consider more than 40 (Forty) percent of the total loans/investments distributed by them as eligible for refinancing in the working capital sector, and loans/investments granted/grantable as working capital shall not be used for the purpose of hoarding goods under any circumstances."
Paragraph Number 2.4(b): "Banks and financial institutions may provide at least 65 (Sixty-Five) percent of the total loans/investments distributed by them under this scheme in the production and service sectors and at most 35 (Thirty-Five) percent in the business sector."
04. In addition, other instructions of the aforementioned circular shall remain unchanged.
05. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991 and Section 18 of the Financial Institutions Act, 1993.
Yours faithfully,
(Md. Zakir Hossain) Director (SMESPD) Phone: 9530552