Regulatory Alerts2020-09-03
Added · Updated
SMESPD Circular Letter No. 08: Special Loan or Investment Facility for CMSME Sector Affected by COVID-19 Pandemic
The Bangladesh Bank removes the previous target of allocating at least 15% of annual total loans/investments to rural working capital loans to enable the rapid distribution of the 20,000 crore Taka stimulus package for the CMSME sector. It introduces a moratorium on loan/installment repayments for cottage, micro, and small sector working capital loans under this package, while keeping the loan nature, one-year tenure, and approved limits unchanged. Banks and financial institutions are required to ensure their allocated distribution targets are achieved by October 31, 2020, with interest rates capped at 9% and reporting via CL-2.
Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh.
SMESPD Circular Letter No. 08 Date: 19 Bhadra, 1427 September 03, 2020
To, Managing Director/Chief Executive Officer All Scheduled Banks and Financial Institutions operating in Bangladesh
Subject: Special Loan/Investment Facility for CMSME (CMSME) sector affected by the outbreak of Novel Coronavirus (COVID-19).
Reference is drawn to your attention to SMESPD Circular No. 01 issued on April 13, 2020, regarding the subject matter.
- Clause 1(g) of the aforementioned circular imposed a condition that at least 15% of the annual total loans/investments must be provided as working capital loans/investments in rural areas. It was stated in the said circular that if loans are distributed quickly without setting annual targets for the distribution of 20,000 crore Taka, affected enterprises in the CMSME sector will be able to resume production. Consequently, it will be possible to restore production and maintain the desired employment levels.
Considering the aforementioned matters, it has now been decided to remove the specified targets for rural and urban areas hereby, in order to achieve the goal of rapidly distributing 20,000 crore Taka under the said stimulus package.
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To facilitate loan distribution and collection and to make it customer-friendly, under the said package, loans/investments for working capital distributed in the cottage, micro, and small sectors may be repaid on a moratorium basis (Moratorium) if necessary. However, the nature of the loan, the time period (1 year), and the approved limit will remain unchanged. In this regard, the effective interest rate (Effective Interest Rate) shall not exceed 9% under any circumstances, and all such loans/investments must be reported in CL-2 as per regulations.
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All banks and financial institutions are required to ensure that their allocated distribution targets under the stimulus package are achieved by October 31, 2020, through effective measures.
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Other instructions mentioned in the circular shall remain unchanged.
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This instruction is issued under the powers conferred by Section 45 of the Bank Company Act, 1991.
Yours faithfully,
(Husne Ara Shikha) Deputy General Manager Phone: 9530502