State lenders waste export fund, now forex in stress further | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Get the Paper
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Thursday
July 24, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Get the Paper
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
THURSDAY, JULY 24, 2025
State lenders waste export fund, now forex in stress further

Banking

Jebun Nesa Alo & Sakhawat Prince
14 June, 2022, 11:10 pm
Last modified: 15 June, 2022, 11:17 am

Related News

  • Dollar rate falling fast – what it means for the economy
  • State-owned banks: Too big to fail or just too broken to fix?
  • BB wants forex intervention fund before peg shift
  • Japan seeks 'fairness' in currency talks with US: Prime Minister Ishiba
  • What gains Bangladesh can make from a weak dollar

State lenders waste export fund, now forex in stress further

Governor Fazle Kabir expressed disappointment over the unusual rise in forced loans and strongly criticised the managing director of a state-owned bank

Jebun Nesa Alo & Sakhawat Prince
14 June, 2022, 11:10 pm
Last modified: 15 June, 2022, 11:17 am

At a time when the Bangladesh Bank is trying to save foreign exchange reserves by limiting foreign currency expenditure amid a dollar crisis in the country, the misuse of reserve money by some exporters has raised concern among the authorities.

Loans given from the foreign exchange reserve have been found to be misused by some exporters, turning those into huge forced loans due to failure in payment to the lenders on the due date.

Borrowers are given foreign currency loans at a minimum cost from the Export Development Fund (EDF), a refinancing fund created from the foreign exchange reserve for bringing export proceeds.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

In the case of many of these loans, no export earnings were generated with buyers failing to pay back the money, resulting in the piling up of forced loans against the EDF in banks, according to findings by the Bangladesh Bank.

Forced loans are created when clients fail to make their letter of credit (LC) payments on maturity dates, and yet banks have to meet their obligations to foreign banks. Delay in LC settlement can happen both in import and export.

For instance, the forced loan against the EDF of Janata bank surged by 410% in one year to Tk7,141 crore at the end of last year from Tk1,400 crore in the previous year, according to the annual report of the bank.

In a recent meeting with the top executives of four state-owned banks – Sonali, Janata, Agrani, and Rupali – the Bangladesh Bank addressed the issue of forced loans against the EDF.

In the meeting, Governor Fazle Kabir expressed disappointment over the unusual rise in forced loans and strongly criticised the managing director of a state-owned bank for issuing substantial loans from the reserve, according to a meeting source.

The governor said these forced loans are foreign exchange reserve money, said the source, quoting the governor.

Lenders continued to provide loans to borrowers from the foreign exchange reserve despite having non-payment against the EDF, according to the central bank findings.

For instance, Thermax Group has taken an EDF loan against its five companies, of which two could not repay the loan, creating a forced loan with the lender Sonali Bank as of December 2021.

The two companies that failed to repay loans against the EDF are Thermax Melange Spinning Mills, with a forced loan of Tk30.64 crore, and Thermax Knit Yarn with Tk216 crore.

Though borrowers are taking loans in foreign currency, the forced loans are being created in local currency.

According to the EDF rule, borrowers will get the highest 270 days to repay the EDF loan after getting export proceeds. If they fail to do so within this period, the Bangladesh Bank will deduct the foreign currency amount from the lender's account maintained with the central bank and the lender will create a forced loan against the borrower.

When a borrower fails to repay the loan, it indicates that the borrower did not repatriate export proceeds according to the EDF loan condition.

However, borrowers are getting loans even after failing to earn export proceeds as there is no provision about punishment if clients fail to repay the loan or do not repatriate export proceeds, said a senior executive of the Bangladesh Bank.

Among other state-owned banks, Sonali Bank has forced loans of Tk331 crore, Agrani Bank has Tk416 crore and Rupali Bank Tk60 crore as of December last year.

The status of these four state banks are just a partial picture of the forced loan issue, as the Bangladesh Bank has no statistics about the total forced loan in the industry against EDF loans.

The Bangladesh Bank has so far disbursed $7 billion EDF loans from its reserves but there is no statistics on how much export proceeds came into the country against those low-cost financing.

A senior executive of the Bangladesh Bank said they do not have such statistics as the recovering part is on the lenders. The Bangladesh Bank only provides the loan to lenders and deducts the amount from the lender's account if customers fail to repay on time.

Currently, borrowers are charged 2% for EDF loans of which Bangladesh Bank gets 1% and lenders get the rest 1% as commission.

During the pandemic from March 2020 to March 2022, borrowers enjoyed a reduced interest rate of 1.75% against EDF loans.

The number of EDF loan beneficiaries was 12,602 as of March this year, according to Bangladesh Bank data.

Exporters in all sectors can get EDF loans and a single exporter can get a maximum of $20 million loan subject to maintaining a single borrower exposure limit, according to the EDF policy.

Despite foreign exchange reserves under severe pressure amid high import expenditure and low earnings, in a recent meeting with the Bangladesh Bank, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) demanded that the EDF be increased from $7.5 billion to $10 billion – to further expedite and expand their shipments.

On the other hand, the International Monetary Fund (IMF) in its safeguards assessment of the Bangladesh Bank for 2021 raised objections about showing the EDF in reserve.

The IMF claimed that the central bank is overstating foreign exchange reserves by showing the EDF with it, which may misguide the government in taking decisions about using the reserve money.

Economy / Top News

state banks / Forex / export fund

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Representational image. Photo: Collected
    Bangladesh, US set for crucial virtual meeting tomorrow over tariff issue
  • Milestone tragedy: CID confirms identities of 5 victims using DNA samples
    Milestone tragedy: CID confirms identities of 5 victims using DNA samples
  • A crane removes debris from the BAF fighter jet that crashed into Milestone School and College on Monday, 21 July 2025. Photo: Olid Ibna Shah/TBS
    Another death from Milestone tragedy takes count to 31 as Mahia succumbs to 50% burns

MOST VIEWED

  • Photo: Collected
    Bangladeshi man jailed for life in UK for murdering wife in front of their baby
  • Ctg port authority halts contractor recruitment for Kamalapur ICD operations for two months
    Ctg port authority halts contractor recruitment for Kamalapur ICD operations for two months
  • Fire at Cosmo School in Mirpur on 23 July 2025. Photo: TBS
    Fire breaks out at Cosmo School in Mirpur following generator explosion
  • Representational image. File Photo: Rajib Dhar/TBS
    Debate arises as edu adviser says postponed HSC exams of 22 and 24 July will be held on same day
  • BB issues dress code for all, discourages short-sleeved or length dresses, leggings for female staff
    BB issues dress code for all, discourages short-sleeved or length dresses, leggings for female staff
  • Infographics: TBS
    Stay orders won’t shield defaulters: BB governor 

Related News

  • Dollar rate falling fast – what it means for the economy
  • State-owned banks: Too big to fail or just too broken to fix?
  • BB wants forex intervention fund before peg shift
  • Japan seeks 'fairness' in currency talks with US: Prime Minister Ishiba
  • What gains Bangladesh can make from a weak dollar

Features

Photo: Collected

24 July: More than 1400 arrested, 3 missing coordinators found

17h | Panorama
Photo: Mehedi Hasan/TBS

Aggrieved nation left with questions as citizens rally to help at burn institute

2d | Panorama
Photo: Mehedi Hasan/TBS

Mourning turns into outrage as Milestone students seek truth and justice

1d | Panorama
Illustration: TBS

Uttara, Jatrabari, Savar and more: The killing fields that ran red with July martyrs’ blood

2d | Panorama

More Videos from TBS

'Brahmanbaria has always been deprived because it fought against fascism'

'Brahmanbaria has always been deprived because it fought against fascism'

59m | TBS Today
All aboard crashed plane feared dead: Tass

All aboard crashed plane feared dead: Tass

1h | TBS News Updates
Remembering Shafin Ahmed

Remembering Shafin Ahmed

1h | Others
Gaza relief workers are being shot at

Gaza relief workers are being shot at

1h | TBS World
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net