Cenbank eases foreign borrowing rules for foreign-owned firms

The Bangladesh Bank has relaxed its foreign borrowing regulations for fully foreign-owned manufacturing and service companies, allowing them to obtain low-cost loans from their parent firms, affiliates, and shareholders.

The central bank issued a circular today (15 July) outlining the revised framework, which applies to fully foreign-owned manufacturing and service companies operating in Export Processing Zones (EPZs), Economic Zones (EZs), Hi-Tech Parks, other specialised zones and areas outside such zones.

Industry insiders said the policy change would enable foreign-owned businesses to secure lower-cost overseas financing and could help attract additional foreign investment into Bangladesh.

Under the new rules, fully foreign-owned companies located outside specialised zones will be permitted to obtain interest-free short-term foreign loans with maturities of less than one year for working-capital purposes without prior approval from the Bangladesh Bank.

The companies will also be allowed to secure interest-bearing loans for business activities, including the purchase of raw materials, at an all-in-cost interest rate of up to 3% a year. Such loans must be repaid in a single instalment upon maturity and may be rolled over for a maximum period of three years.

For medium-term financing with maturities ranging from one to five years, eligible firms may borrow up to $50 million in interest-free loans to finance capital expenditures, including the acquisition of machinery and equipment and the execution of construction projects.

The central bank circular also permits companies to obtain interest-bearing medium-term loans of up to $5 million.

In addition, firms will be allowed to take long-term foreign loans with maturities exceeding five years. Where interest is charged, the borrowing cost must not exceed 3% annually.