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Thursday, April 16, 2009

NBFIs now entitled to foreign loans


The Daily Star

Non-bank financial institutions (NBFIs) can now take foreign loans only for funding manufacturing and infrastructure (except housing) sectors, the central bank said.

The Bangladesh Bank (BB) in a circular issued yesterday however imposed a set of seven conditions on the NBFIs for receiving such loans and asked them to comply with those.

The financial institutions will have to submit a copy of the draft credit agreement while applying to the BB for approval of the foreign loan. Exact interest rate, payment schedule, rate of down payment and all other fees and expenses will have to be mentioned along with the application.

The loan taken in foreign currency will have to be kept in a bank and then disbursed in local currency, according to BB regulations.

The time frame for repayment including the grace period will be minimum five years.

The BB will have to be apprised of the cause of taking loan, loan-equity ratio, and the mode of repayment.

It has to be ensured that the rate of interest of a financial institution is competitive with the rate of other such borrowers.

The BB said it has been observed that different NBFIs failing to collect loan from local sources applied to the BB to allow them to take loan from foreign sources.

A BB official said: "As the capital account is not convertible in our country for taking loan from foreign sources it has to be approved by the central bank or the government committee on hard term loans."

Strict conditions have been imposed in case of taking such loans against the backdrop of the financial crisis in the developed world, the BB official said.

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