Cenbank rolls out Tk60,000cr stimulus to restart factories, create 25 lakh jobs

Infographic: TBS

The central bank has unveiled a massive Tk60,000 crore stimulus package, aiming to reopen shuttered factories, revive stalled exports, and create jobs for unemployed youth through loans priced as low as 4%.

The package is a "production and employment revival" programme that could generate nearly 25 lakh jobs, Governor Md Mostaqur Rahman said at a briefing today (23 May).

He said the Tk41,000 crore will go for refinancing and reopening closed factories, while the central bank itself will provide Tk19,000 crore from its own funds.

A Bangladesh Bank document, seen by The Business Standard, shows the package is far broader than a conventional stimulus. It details how idle liquidity trapped in banks will be redirected into distressed but productive sectors through subsidised credit, government-backed interest support and long-term refinancing.

The central bank plans to create a minimum three-year refinancing fund worth Tk41,000 crore by mobilising deposits from banks sitting on excess liquidity.

These are banks whose Advance-Deposit Ratio (ADR) has crossed 70% but remains within the regulatory ceiling, leaving them with surplus funds they are unable or unwilling to lend due to rising default risks and weak borrower demand.

The Bangladesh Bank will accept those deposits at 10% interest. Of that amount, the government will bear 7% as subsidy from the national budget, with annual support capped at around Tk3,000 crore. Bangladesh Bank will pay the remaining 3% from the interest income it earns through refinancing operations.

Banks borrowing from this fund will pay Bangladesh Bank 3% interest and lend onward at capped rates. Most borrowers will receive loans at a maximum 6%, while large industries will pay 7% and start-ups only 4%.

A senior central bank official told TBS that banks will be required to ensure strict monitoring so that the fund cannot be diverted to other purposes.

Banks will deploy their own officials to monitor large industrial units receiving support, while authorities are also considering third-party oversight, he said.

He said banks would open separate escrow accounts for each factory under the scheme, with all export and domestic sales proceeds routed through them for loan recovery. The central bank's upcoming circular is expected to formalise the directives.

How Tk60,000cr package is structured

The programme has been divided into two pools.

Pool 1 consists of a Tk41,000 crore refinancing window. Its largest component, Tk20,000 crore, is aimed at reopening closed industrial and service-sector businesses hit by the banking crisis, energy shortages, and capital constraints. These firms will receive loans at 6%.

SMEs, which currently borrow at 15-16%, will receive Tk5,000 crore at a capped 6% rate.

The package further allocates Tk10,000 crore for agriculture and rural economy, Tk3,000 crore for agri-hubs and Tk3,000 crore for export diversification.

Pool 2 comprises Tk19,000 crore from Bangladesh Bank's own funds for schemes outside sovereign guarantee coverage.

The allocations include Tk5,000 crore for pre-shipment credit refinancing, Tk5,000 crore for cottage and micro enterprises through Palli Karma-Sahayak Foundation, Tk1,000 crore for overseas employment loans through Probashi Kallyan Bank, Tk1,000 crore for the unemployed through Karma Sangsthan Bank, and Tk1,000 crore for rural activities through Ansar-VDP Unnayan Bank.

It also includes Tk1,000 crore for green products, Tk500 crore for start-ups, Tk2,000 crore for shrimp and fish exports, Tk2,000 crore for leather and footwear exports, and Tk500 crore for the creative economy, including digital services, media, entertainment, fashion, arts and culture – the country's first dedicated refinancing support for the sector.

Why now?

The central bank document acknowledges the structural dysfunction now paralysing the financial system. Several banks have become weighed down by classified loans and capital flight. Falling depositor confidence triggered withdrawals, shrinking banks' lending capacity.

At the same time, deposits migrating to relatively stronger banks created excess liquidity elsewhere in the system. But those banks have remained reluctant to lend to productive sectors amid rising credit risks and economic uncertainty.

As a result, money has remained idle in parts of the banking sector while factories starved of working capital have struggled to survive.

Private sector credit growth has already collapsed to a historic low of 4.7%. Bangladesh Bank believes the stimulus can break that deadlock by acting as an intermediary, pulling excess liquidity from risk-averse banks and redirecting it into pre-identified sectors.

Employment promise

Bangladesh Bank estimates the package could generate 25 lakh direct and indirect jobs.

The largest employment target is 9 lakh jobs in agriculture and the rural economy. SMEs are expected to create 5 lakh jobs. Closed industries 2 lakh jobs. Cottage and micro enterprises through PKSF are expected to add another 2 lakh jobs. Overseas employment is projected at 1 lakh jobs. Rural economic activity through Ansar-VDP is expected to generate 1 lakh jobs.

Other sectors, including start-ups, green products, leather, shrimp exports, pre-shipment finance, and the creative economy, are each projected to generate around 50,000 jobs.

What bankers say

Mosleh Uddin Ahmed, managing director and CEO of Shahjalal Islami Bank said private sector credit growth has fallen to a three-decade low and the central bank offering 10% interest is now attractive for banks as investment.

"Deploying funds through this scheme is more profitable than lending in the call money market at 4-5%," said the banker.

However, he added that banks would avoid lending where repayment prospects are weak. Even if loans turn bad, Bangladesh Bank will recover funds from the lending bank's account.

He further said preventing fund diversion is essential and that strict oversight is needed to ensure proper use and recovery of the money.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said there is no credit guarantee in the package, which creates a major risk for banks. "Banks know their own clients better, while lending to distressed customers of other banks is often risky."

He further said injecting funds alone will not revive factories, rather uninterrupted gas and electricity supply is essential. He further noted that rising energy costs and infrastructure bottlenecks mean liquidity support alone cannot deliver results.

Mahbubur also said several refinance schemes remain underutilised due to weak credit demand, adding that improving the investment climate is more important than new funds.

What economists say

Fahmida Khatun, executive director of CPD said the packages could raise inflationary pressure due to a large inflow of money into the economy. However, she said this could be partly offset if job creation boosts purchasing power among the unemployed.

The economist added that the government must strengthen social protection for poor and low-income households, adding that proper implementation is critical, with regulators ensuring funds are used for their intended purpose and violations punished.

Mustafizur Rahman, distinguished fellow at CPD, also said authorities must be cautious in lending to closed factories, as unviable units cannot be revived through fresh funding.

He said effective implementation would raise production of goods and services, helping to soften inflationary pressure.

"In the initial stage, money supply will increase. But if projects perform well, medium-term inflation should remain manageable," he said.

He further said careful selection of beneficiaries is essential. "Priority should go to enterprises with stronger recovery prospects and operational capacity."