SMESPD Circular Letter No. 16: Special loan/investment facility of BDT20,000 crore provided to CMSME sector affected by Novel Corona Virus (COVID-19) pandemic

Bangladesh Bank Chief Executive Office Motijheel, Dhaka-1000 Bangladesh.

SMESPD Circular Letter No. 16 Date: Agrahayan 11, 1427 November 26, 2020

Managing Directors/Chief Executives All Scheduled Banks and Financial Institutions operating in Bangladesh

Regarding the special loan/investment facility of BDT 20,000 crore provided to the CMSME sector affected by the outbreak of Novel Corona Virus (COVID-19).

Reference is drawn to your attention to SMESPD Circular No. 01 issued on April 13, 2020; SMESPD Circular Letter No. 07 issued on August 31, 2020; SMESPD Circular Letter No. 08 issued on September 03, 2020; SMESPD Circular Letter No. 12 issued on October 28, 2020; and SMESPD Circular Letter No. 13 issued on November 01, 2020, on the subject cited above.

2. Through clause 1(k) of SMESPD Circular No. 01 dated April 13, 2020, the annual proportional rate of loan/investment by banks and financial institutions in the production, service, and business sub-sectors was fixed at 50, 30, and 20 percent respectively. Clauses 4(k), 4(g), and 4(h) of the same circular describe the distribution of loan/investment by sub-sector and matters regarding the arrangement and limits of customer-oriented loan/investment.

3. Through SMESPD Circular Letter No. 07 dated August 31, 2020, the overall annual proportional rate of loan/investment in the production and service sectors under the discussed package was rearranged to 80 percent, and loan/investment limits were defined for borrowers in the production and service industries. Subsequently, through SMESPD Circular Letter No. 12 dated October 28, 2020, the annual proportional rate of loan/investment by banks and financial institutions was fixed at a maximum of 30 percent for the business (trading) sub-sector and at least 70 percent overall for the production and service sub-sectors.

4. On the other hand, according to clause-04 of SMESPD Circular Letter No. 08 dated September 03, 2020, and clause-04 of SMESPD Circular Letter No. 13 dated November 01, 2020, the time limit for the implementation of the loan/investment distribution targets fixed for banks and financial institutions under the discussed package was defined.

5. In the current data analysis, it is observed that a large portion of the loan/investment by banks and financial institutions is invested in the trading sector. Increasing the proportional rate of investment in this sector will facilitate the inclusion of more affected customers under the said stimulus package. It is also observed that some banks and financial institutions under the discussed package are unable to achieve the desired level of loan/investment distribution.

6. Now, in order to maintain commercial institutions in the production and service industries, to reduce the loss of genuine affected entrepreneurs engaged in business (trading), to fulfill the loan demand in the said sub-sector by providing loan/investment facilities for working capital, and to ensure the proper implementation of the discussed package, the following decisions have been taken:

a) The annual proportional rate of loan/investment by banks and financial institutions in the business (trading) sub-sector, as described in clause 1(k) of SMESPD Circular No. 1/2020 and clause 4(k) of SMESPD Circular Letter No. 12/2020, is redefined from 30 percent to a maximum of 35 percent;

b) If the ratio of investment provided/given by banks and financial institutions in the business (trading) sub-sector under this stimulus package exceeds 30 percent of the annual loan/investment (which cannot exceed 35 percent in any case), the ratio of loan/investment provided/given in the production and service sub-sectors will decrease proportionally. However, the overall ratio of loan in the said production and service sub-sectors will not be less than 65 percent;

c) In the definition of loan limits as described in clauses 4(k), 4(g), and 4(h) of SMESPD Circular No. 1/2020 and clause 2(k) of SMESPD Circular Letter No. 07/2020, considering the extent of loss to customers in the production, service, and business sub-sectors, the amount of loan/investment to be provided to beneficiary institutions (working capital) will be determined based on the bank's existing credit policy and the bank's customer relationship. However, in the case of existing customers, it will not exceed the working capital loan/investment facility provided in the previous year;

7. The time limit for the implementation of the loan/investment distribution targets under the discussed package has been redefined to December 31, 2020.

8. In addition, other instructions of the aforementioned circulars and circular letters will remain unchanged.

9. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

Yours faithfully,

(Md. Ali Mahmud) Managing Director (In-charge) Phone: 9530172