SMESPD Circular No. 02: Tk 10,000 Crore Refinance Scheme for CMSME Sector to Provide Working Capital Facility to Entrepreneurs

1 Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh. Ref. No. SMESPD SME & Special Programs Department SMESPD Circular No.-02 Date: Baisakh 13, 1427 April 26, 2020 Managing Director / Chief Executive Officer All Scheduled Banks and Financial Institutions operating in Bangladesh Respected Sir/Madam,

Regarding the refinance scheme to provide working capital loan/investment facilities to the affected CMSME sector due to the outbreak of Coronavirus (COVID-19).

Reference is drawn to your attention to SMESPD Circular No.-01 issued on April 13, 2020, on the above-mentioned subject.

2. In order to counter the possible economic impact of the outbreak of Coronavirus (COVID-19) in Bangladesh, instructions are being issued for the receipt/disbursement of loan/investment facilities of Tk 20,000 Crore under the financial assistance package announced by the Honorable Prime Minister for the affected Cottage, Micro, Small, and Medium Enterprises/Industries (CMSME). Accordingly, under the said circular, scheduled banks/financial institutions will provide working capital loan/investment facilities to CMSME institutions affected by the outbreak of Coronavirus from their own funds based on bank-customer relationships. In this regard, to ensure liquidity for banks and financial institutions in providing working capital loan/investment facilities under the said financial assistance package, Bangladesh Bank has established a Refinance Scheme of Tk 10,000 Crore (Refinance Scheme). Under SMESPD Circular No.-01/2020, up to 50% of the credit/investment facilities disbursed by banks/financial institutions from the allocated funds will be provided as refinance facilities from this scheme. The following instructions are to be followed in the operation of the said scheme:

1. Name of the Scheme: "Refinance Scheme to Provide Working Capital Loan/Investment Facilities to the CMSME Sector to Counter the Possible Adverse Effects of Coronavirus".
2. Source of Funds: Own funds of Bangladesh Bank.
3. Amount of Funds: Tk 10,000 Crore.
4. Tenure: 03 (Three) years.

2 5) Interest/Musharakah Rate: The interest/Musharakah rate will be 4 (Four) percent, which will be levied on a quarterly basis (based on March, June, September, and December). 6) Bank-wise Fund Allocation: Subject to compliance with all instructions of SMESPD Circular No.-01/2020, each bank/financial institution will be eligible for refinance under this scheme up to 50% of the credit/investment facilities disbursed. Loans/investments taken under this scheme shall not be used for any other sector/purpose outside the scope of SMESPD Circular No.-01/2020. 7) Eligibility of Participating Institutions: a) All state-owned banks/financial institutions operating in Bangladesh can avail the said refinance facility. b) All private banks/financial institutions can avail the said refinance facility. However, applications for refinance of Problem/Distressed banks/financial institutions will be considered on a case-to-case basis. 8) Loan Agreement: Interested scheduled banks and financial institutions wishing to avail the said refinance facility must execute a loan agreement with Bangladesh Bank for their annual approved working capital limit. Banks/financial institutions providing working capital loan/investment facilities to the CMSME sector under SMESPD Circular No.-01/2020 through the agreement signed with Bangladesh Bank can avail the refinance facility within the limit specified under this scheme. In this regard, the additional applicable instructions of Master Circular 02/2019 regarding CMSME authorization will remain valid in determining the refinance-eligible loan/investment. 9) Application for Refinance and Refinance Process under the Scheme: a) After the disbursement of loan/investment under SMESPD Circular No.-01/2020, application for refinance up to 50% of the credit/investment facilities disbursed in the previous month can be made to Bangladesh Bank by the 10th of the following month. b) To obtain refinance, the authorizing bank/financial institution will submit the required information in the format specified in Annex-A and Annex-B to the Chief Manager, SME & Special Programs Department. c) If a bank/financial institution provides loan/investment facilities to a new beneficiary under SMESPD Circular No.-01/2020 after any part of the refinance loan/investment limit has been paid, the authorizing bank/financial institution can avail refinance facilities from this scheme again. In this way, a bank/financial institution can avail refinance facilities within its own limit for a total of 03 (Three) years. 10) Repayment/Collection Method for Loans Taken for Refinance: a) The principal amount of the refinance along with interest/Musharakah will be deducted from the current account of the concerned bank and financial institution kept at the Motijheel office of Bangladesh Bank according to the collection schedule mentioned in the loan agreement. In this regard, the concerned institution must maintain sufficient funds in its current account.

3 b) If a grace period is provided for loans distributed to customers under the scheme, a grace period (up to 03 months) will also be provided for the provision of refinance. c) If the distributed loan/investment is collected/settled for any reason or if 01 (One) year has passed (whichever is earlier), the entire amount credited to the bank/financial institution along with interest of the last quarter must be paid to Bangladesh Bank. Otherwise, the amount taken in such a manner will be payable in a lump sum along with interest/Musharakah at a rate 2% higher than the interest/Musharakah rate levied during the refinance period. 11) Insufficiency of Funds/Balance: If payment of interest/Musharakah along with the principal amount of the refinance is not possible due to insufficiency of funds/balance in the current accounts of banks and financial institutions kept at Bangladesh Bank, the payable amount will be collected along with additional interest/Musharakah for the additional period at a rate 2% higher than the interest/Musharakah rate levied during the refinance period, subject to fund insufficiency. 12) Demand for Documents and Project Inspection: Bangladesh Bank may demand documents related to refinance approval and inspect projects before or after approval as necessary. 13) Other Instructions: a) If the refinanced amount under this scheme is used for any other purpose outside the scope of SMESPD Circular No.-01/2020, the concerned bank/financial institution will be charged a lump sum along with interest/Musharakah at a rate 2% higher than the specified interest/Musharakah rate on that amount by Bangladesh Bank. b) All steps for customer-wise loan/investment distribution under this scheme must be properly complied with the instructions specified in SMESPD Circular No.-01/2020. c) All responsibilities for the collection of loans/investments distributed to customers will remain with the bank/financial institution distributing the loan/investment. Bangladesh Bank's claim will not be linked with the collection of such loans/investments by customers. d) Information regarding refinance under this scheme must be sent to this department monthly by the 10th of the following month according to Annex-C.

This circular is issued under the powers conferred by Section 45 of the Bank Company Act, 1991 (as amended up to 2018). The instructions of this circular will be implemented immediately.

Yours faithfully, (Lila Rashid) Chief Manager Phone: 9530502

4 Annex-A Sample Application for Refinance by Authorizing Bank/Financial Institution Source: ----------------- Date:------------- Chief Manager SME & Special Programs Department Bangladesh Bank Head Office, Dhaka. Respected Sir/Madam,

Application for Refinance under SMESPD Circular No.-02/2020.

With reference to the subject above, it is informed that under SMESPD Circular No.-01/2020 issued on April 13, 2020, our bank has authorized a total of ----------- Taka against ---- loans/investments in the month of --/20**. All instructions mentioned in the said circular have been properly followed in the distribution of loans/investments. In this regard, information on the distributed loans/investments (Annex-B) is submitted herewith for the purpose of obtaining refinance from the scheme specified in SMESPD Circular No.-02/2020 issued on April 26, 2020.

Therefore, we request you to provide refinance of a total of ------------------- Taka (in words ---------------------------) mentioned in Annex-B to our bank/financial institution under the refinance scheme specified in SMESPD Circular No.-02/2020.

Yours faithfully, (---------------------------) Managing Director / Chief Executive Officer / Foreign Bank's Chief Representative for Bangladesh Operations Phone No:

5 Annex-B

1. Name of the Authorizing Bank/Financial Institution:
2. Maximum Limit (in Taka) allocated to our bank/financial institution under SMESPD Circular No.-01/2020:
3. Maximum Limit (in Taka) allocated to our bank/financial institution for refinance under SMESPD Circular No.-02/2020:
4. Amount (in Taka) of refinance provided by Bangladesh Bank to our bank/financial institution so far under SMESPD Circular No.-02/2020:
5. Amount (in Taka) of principal paid by our bank/financial institution against refinance so far:
6. 50% of Total Loans/Investments Distributed up to /20: ------- (See detailed table)

Table Sr. No. Name of Loan/Investment Recipient Institution Trade License No. of Loan/Investment Recipient Institution Report No. to Bangladesh Bank Regarding Distribution of Loan/Investment Date of Distribution of Loan/Investment Amount of Distributed Loan/Investment (in Taka) Amount of Interest/Musharakah Levied on Distributed Loan/Investment (in Taka) Balance of Distributed Loan/Investment on Date of Application (in Taka) 50% of Distributed Loan/Investment (in Taka) Date Source No. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)={(9) x 50%}

Name of the Responsible Officer for any communication regarding Annex-B: Designation: Office Phone No.: Mobile Phone No.: E-mail:

6 Annex-C Information Regarding Refinance Received and Repaid under SMESPD Circular No.-02/2020 (Based on the last date of the previous month) Name of Bank/Financial Institution: Amount (in Taka) Limit to be provided as Working Capital to CMSME Institutions under Financial Incentive specified in SMESPD Circular No.-01/2020 Maximum Limit allocated to our bank/financial institution for refinance under SMESPD Circular No.-02/2020 Amount of Loans/Investments Distributed by our bank/financial institution under SMESPD Circular No.-01/2020 in the past month Amount of Capitalized Interest/Musharakah Levied on Loans/Investments Distributed by our bank/financial institution under SMESPD Circular No.-01/2020 in the past month Amount of Refinance Applied for by our bank/financial institution under SMESPD Circular No.-02/2020 in the past month Amount of Refinance Provided to our bank/financial institution under SMESPD Circular No.-02/2020 in the past month Amount of Principal Paid by our bank/financial institution against Refinance Provided under SMESPD Circular No.-02/2020 in the past month (1) (2) = {(1) x 50%} (3) (4) (5) (6) (7)

Name of the Responsible Officer for any communication regarding Annex-C: Designation: Office Phone No.: Mobile Phone No.: E-mail: