Involve private banks in Bashundhara Gold Refinery project: BB instructs banks

The Bangladesh Bank (BB) has directed state-owned banks to involve private ones for the disbursement of loans under the Gold Refinery Project, requiring the construction of a gold refinery owned by Bashundhara Group.

At a meeting, the BB revised an earlier agreement and said that banks would lend 60% of the total cost of the project, while the remaining would be met by Bashundhara Group.

The refinery will cost Tk5,790 crore.

Under the current agreement, Bashundhara is supposed to cover 30% of the cost and five state-owned banks -- Sonali, Rupali, Janata, Agrani and Bangladesh Development Bank -- would provide syndicated loans for the remaining 70%.

According to the institutions concerned, the term for the loan is seven years and the interest rate is 9%.

Bashundhara will get a break in repaying the loan installments for the first two years of the project.

After the meeting, several senior officials of the central bank, under the condition of anonymity, said that the gold refining project was completely new for Bangladesh so the risk was high.

Moreover, if only the five-state owned banks disburse the loan, the risk falls on the state. Therefore, the central bank has suggested involving private banks in the project, they said.

A source said that state-owned banks are able to lend up to 10% of the bank's capital to individual customers as per the annual agreement, but the loan amount for the refinery was above 20%.

According to the agreement, the state-owned banks would disburse 10% of the loans while private banks would give the rest. However, private banks have the opportunity to lend up to 25% of their capital to a single borrower.

Insiders say that six banks have already formed a syndicate to disburse the loan. The syndicate is led by state-owned Agrani Bank.

Bashundhara Group became the first company in the company to get permission to build a gold refinery.

The Bashundhara Gold Refinery Limited will be set up on 470 acres of land in Joara Sahara Mouza of Bhatara Police Station next to the Dhaka-Purbachal Highway.

Sayem Sobhan, the MD of Bashundhara Gold Refinery Limited, recently became the president of the Bangladesh Jewelers Association.

A review of the related documents show that the Bashundhara Gold Refinery Project entered an agreement with WorldEra Corporation of the United Arab Emirates (UAE) worth Tk2,658 crore.

The agreement includes various charges including purchase of equipment, packing charge, supervision fee, transportation cost of import, contractor fee, installation and commissioning fee.

Upon completion of the project, the refinery will produce 200 kilogrammes of gold bars, 150kg of gold jewellery and 70kg of silver per day.

The land value of where the project is being undertaken is an estimated Tk855 crore, while the cost of the gold refinery equipment is Tk3,268 crore.

With the launch of the factory, Bangladesh will finally enter the era of gold-refining.

The move was made possible when the Ministry of Commerce amended the Gold Policy-2018 in June to allow the import of unrefined and partially refined gold in the country.

Various European countries, India and China are among the world's leading producers and exporters of jewellery.

In 2019, the market for machine and handmade gold ornaments in the world was around $22,930 million. By 2025, the market size is expected to grow to $29,170 million.

Yesterday's directive from the BB governor was given in the presence of the managing directors of the five state-owned banks and Chairman of Bashundhara Group Ahmed Akber Sobhan. Secretary of the Financial Institutions Department of the Ministry of Finance Sheikh Mohammad Salim Ullah, along with other officials, was also present at the meeting.