Cenbank tightens EDF eligibility for overdue borrowers
Manufacturer-exporters who settled EDF liabilities through funded facilities will remain ineligible for fresh loans until their overdue export proceeds are repatriated or exempted by the Discount Committee.
Highlights:
- Bangladesh Bank tightens EDF rules for overdue borrowers
- Master circular consolidates EDF operating guidelines
- Exporters with overdue proceeds barred from fresh EDF loans
- Central bank revises EDF borrowing limits by sector
- BB introduces penalty rate for overdue EDF loans
The Bangladesh Bank has tightened access to its Export Development Fund (EDF), ruling that manufacturer-exporters with overdue export proceeds will no longer be eligible for fresh financing until the dues are realised or exempted under specified conditions.
Keep updated, follow The Business Standard's Google news channel
The central bank issued a comprehensive Master Circular on the EDF today (23 July), consolidating previous instructions into a single framework aimed at streamlining operational procedures and improving the management of the foreign exchange financing facility for exporters.
Issued by the Foreign Exchange Policy Department (FEPD), the circular updates operational guidelines for authorised dealers and manufacturer-exporters, placing particular emphasis on repayment discipline.
Under the new guidelines, manufacturer-exporters whose EDF liabilities have been settled through funded facilities will not qualify for further EDF loans. They may, however, regain eligibility if the overdue export proceeds are later repatriated or if the delay is exempted by the Discount Committee.
The circular also states that any manufacturer-exporter failing to repatriate export proceeds within the statutory 120-day period will be disqualified from receiving further EDF financing until the overdue proceeds are realised or the delay is otherwise exempted.
Interest rates, loan terms
The interest rate on EDF loan disbursements to authorised dealers has been set at the six-month Secured Overnight Financing Rate (SOFR) plus 0.5% a year. Authorised dealers will charge manufacturer-exporters the six-month SOFR plus 1.5% a year.
The Bangladesh Bank has also introduced a penal interest rate of four percentage points above the prevailing rate for overdue amounts.
The standard tenor of EDF loans will remain 180 days. The central bank may extend the repayment period to up to 270 days upon receiving a valid application explaining the need for a longer period for the repatriation of export proceeds.
Applications seeking an extension must be submitted at least 10 days before the loan's maturity date and signed by an official not below the rank of deputy managing director, according to the circular.
Revised borrowing limits
The circular says EDF financing will be available for procuring inputs against back-to-back letters of credit (LCs) for direct exports as well as for local supplies of intermediate goods.
The Bangladesh Bank has also revised borrowing limits for different export sectors.
Members of the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Textile Mills Association will be eligible to borrow up to $20 million.
The borrowing ceiling has been set at $15 million for members of the Bangladesh Knitwear Manufacturers and Exporters Association and the Bangladesh Linen, Flax and Allied Fibres Association.
Other sectors, including furniture and bicycle manufacturers, will be eligible for loans of up to $10 million.
The circular also requires authorised dealers to ensure that imported inputs financed under the EDF comply with value addition requirements and the government's Import Policy Order.
