BRAC, Prime banks to join govt’s urea import initiative; BCIC seeks Tk1,000cr state guarantee

The government is moving to bring BRAC Bank and Prime Bank into financing urea imports for the first time, with the Bangladesh Chemical Industries Corporation (BCIC) seeking Tk1,000 crore in state guarantees to open letters of credit through the two private lenders.

Under the proposal submitted to the Finance Division via the industries ministry, the state enterprise requested Tk500 crore in guarantees each for BRAC Bank and Prime Bank.

BCIC Chairman Md Mahmudur Rahman told The Business Standard that involving private banks would create a new window for financing fertiliser imports, although most imports would continue to be financed through state-owned banks.

A senior official of the Finance Division's Treasury and Debt Management Wing, speaking on condition of anonymity, said the guarantee is being processed and is expected to be approved soon.

"Any scheduled bank can finance the imports, so there is no problem with involving private banks in the government's fertiliser import process," he said.

Infograph: TBS

The official said the government's main consideration is the financial strength of the banks and whether they would be able to handle the required transactions. He said the two banks proposed by the BCIC are financially stronger than many other banks, which was why the government had agreed to provide the guarantees.

Until now, the BCIC has opened letters of credit for fertiliser imports through state-owned Sonali Bank, Janata Bank, Agrani Bank, and Bangladesh Krishi Bank.

The move comes as the BCIC is struggling to repay loans taken to finance earlier fertiliser imports. According to BCIC data, Tk6,553.60 crore in fertiliser import loans remained outstanding with banks as of 30 June.

The corporation has warned that failure to repay the loans could cause them to become overdue, potentially preventing banks from opening new letters of credit until the outstanding loans are settled. This could create a financing risk for the BCIC's target of importing 12 lakh tonnes of urea in the fiscal year 2026-27.

Why private banks were brought in

The initiative to involve private banks comes against the backdrop of the BCIC's financing constraints. Delays in repaying existing post-import financing loans have reduced the capacity of state-owned banks to open new letters of credit, while the BCIC is also required to finance a fresh round of urea imports during the current financial year.

The BCIC is therefore seeking to expand its capacity to open letters of credit by bringing additional banks into the financing arrangement. The government guarantee is required to enable the new banks to participate.

The government had earlier issued special bonds to help settle the BCIC's fertiliser import liabilities. In January 2024, it issued special bonds worth Tk3,016 crore in favour of Sonali Bank and private-sector IFIC Bank against outstanding fertiliser import liabilities.

The move to involve BRAC Bank and Prime Bank is therefore part of efforts to address the financing pressures created by the BCIC's existing loans, delays in receiving government subsidy payments and the need to continue importing fertiliser.

During the interim government's tenure, a meeting chaired by the then finance adviser at the finance ministry on 3 February 2025 decided that fertiliser import letters of credit could be opened through private banks alongside state-owned banks.

BRAC Bank and Prime Bank subsequently wrote to the BCIC expressing interest in providing post-import financing for fertiliser imports against government guarantees.

Tareq Refat Ullah Khan, managing director and CEO of BRAC Bank, told TBS, "This initiative is not an isolated effort; it is part of a broader strategic commitment to support Bangladesh's government-owned enterprises by making their procurement and sourcing more efficient, seamless, and cost-effective."

He added, "BRAC Bank has now emerged as a major banking partner for the country's petroleum, fertiliser, and LNG procurement authorities, enabling smoother access to essential imports while contributing meaningfully to the national economy and energy security."

Tk6,554cr fertiliser import loans remain outstanding

According to BCIC calculations, Tk7,628.49 crore in loans taken from banks for earlier urea imports remained unpaid. Another Tk8,582.77 crore was added through loans taken during FY26, bringing the total to Tk16,211.26 crore.

The BCIC has repaid Tk9,657.66 crore of the total, leaving Tk6,553.60 crore outstanding with banks as of 30 June.

The corporation fears that if it does not repay these loans quickly, they could become overdue. Banks could then stop opening new letters of credit, disrupting the continuity of urea imports.

BCIC seeks two-year loan repayment period

The BCIC imports fertiliser using banks' post-import financing facilities. Under the arrangement, banks make payments for imported fertiliser, after which the BCIC is expected to repay the loans within 180 days from the proceeds of fertiliser sales.

The corporation says it cannot repay the loans within the stipulated period because it takes a long time to receive government subsidy payments against fertiliser sales.

The BCIC has therefore proposed, through the industries ministry, that the Bangladesh Bank extend the repayment period for post-import financing loans from 180 days to 720 days, or two years.

The Bangladesh Bank has told the BCIC that it will take the necessary steps if the respective banks' boards agree to extend the loan tenors.

The BCIC subsequently contacted the banks, which said they could agree to extend the loans if the tenure of the government's guarantees was also extended to two years.

The BCIC has consequently requested the Finance Division to extend the tenure of the guarantees until June 2028.

A Finance Division source said the tenure of guarantees provided against fertiliser imports is being extended to two years.

"Ensuring fertiliser imports to maintain agricultural production is one of the government's priority activities. Therefore, the tenure of the guarantees is being extended to two years to ensure fertiliser imports," the official said.

State guarantees for four banks total Tk17,500cr

The government currently has guarantees worth Tk7,000 crore for Sonali Bank, Tk4,000 crore for Janata Bank, Tk4,000 crore for Agrani Bank and Tk2,500 crore for Bangladesh Krishi Bank against fertiliser imports by the BCIC.

The four state-owned banks therefore have a combined Tk17,500 crore in government guarantees. These guarantees are scheduled to expire on 31 December.

Under the arrangement, if the BCIC fails to pay for imported fertiliser, the government assumes responsibility for paying the relevant bank's dues, subject to the terms of the guarantee.

The proposed inclusion of BRAC Bank and Prime Bank would add another Tk1,000 crore in state guarantees.

Gas shortages could increase import dependence

The BCIC imports urea every year based on demand projected by the agriculture ministry, while its factories also produce the fertiliser locally.

The BCIC imported 14.80 lakh tonnes of urea in FY26, while the import target for FY27 has been set at 12 lakh tonnes.

However, interruptions in gas supplies to the country's fertiliser factories have disrupted domestic production. Natural gas is the main raw material for urea production.

The longer the gas supply remains disrupted, the lower domestic production is likely to be, increasing dependence on imports. In its letter, the BCIC said prolonged gas shortages amid the current global conflict situation could prevent domestic factories from operating at their capacity.

As a result, the country may need to import more urea than the current target.

Annual domestic demand for urea is estimated at 26-27 lakh tonnes, of which 8-11 lakh tonnes are produced locally. The BCIC mainly imports the remaining requirement from Saudi Arabia, the United Arab Emirates and Qatar.

The government is continuing to approve large urea imports in the current financial year. In August, it approved the import of 40,000 tonnes of urea from Saudi Arabia's SABIC, followed by another approval for 40,000 tonnes in September.

Adequate national stocks, but farmers report local shortages

Despite the government's claim that fertiliser stocks are sufficient, farmers in several northern districts have reported difficulty obtaining fertiliser at government-set prices.

On 9 September, Fisheries and Livestock Minister Sultan Salahuddin Tuku told parliament that there was no fertiliser shortage and that the government had 51.71 lakh tonnes of all types of fertiliser in stock and ready for use.

He said demand for the Boro and Rabi seasons was 35.87 lakh tonnes, implying a surplus of about 15.84 lakh tonnes after meeting projected demand.

However, farmers in Kurigram, Rajshahi, Lalmonirhat and other northern districts have complained that they are unable to obtain fertiliser according to their requirements at government-set prices.

In some cases, farmers have reportedly had to wait for long periods at dealer points but received no more than one bag. Some have consequently bought fertiliser from open-market or unauthorised sellers at Tk300-500 more per bag.

There have also been recent incidents of highway blockades, farmers entering dealers' warehouses and dealers being confined to their premises over allegations of fertiliser shortages.

The government has attributed the problems largely to weaknesses in the supply and distribution system. It has recently said that fertiliser monitoring cells are being formed in all 64 districts.

According to BCIC data, about 3,759 dealer points appointed earlier are currently vacant. The administration also suspects that malpractice by some dealers is contributing to artificial shortages.

The government is taking steps to appoint new dealers and strengthen monitoring at the district level to address the situation, officials said.