On 2nd April, 2020, Bangladesh Bank published a circular detailing the eligibility and application, disbursement procedures and repayment procedures of the Tk. 5000 Crore Financial Stimulus package declared by the Hon’ble Prime Minister. The key features/highlights of the circular and the specific details are presented below.
- Total 5000 Cr fund to be distributed as loans to export oriented industrial establishments
- 2% service charge payable to the bank disbursing the loan,
- penal interest only if loan defaulted
- Loan can only be used to pay workers/employees
- Disbursement to be done by bank directly to workers/employees
- Loan must be repaid by borrower within 2 years
Purpose of the Tk. 5000 Cr Financial Stimulus Fund
- To aid active export-oriented industrial establishments so that they can continue to pay their employees during the COVID-19 crisis.
Management of the Financial Stimulus Fund
- The fund will be managed by the Accounts & Budgeting Department of Bangladesh Bank. The Head Office/Principal Office of the commercial banks receiving the Financial Stimulus Fund shall be responsible for the loan disbursement and repayment procedures of it.
Eligibility to receive loans from the Financial Stimulus Fund
- Companies exporting at least 80 % of its manufactured goods are deemed to be export-oriented industrial establishments
- Only companies which have paid salaries of its employees/workers for the months of December 2019, January 2020 and February 2020 will be considered to be “active” industrial establishments and be eligible
- Companies applying for the loan will have to provide a certificate from their concerned trade association, e.g. BGMEA/BKMEA as proof of being export-oriented industrial establishment.
- The applicant industrial establishment shall be a customer of the scheduled bank to which it will apply for the loan.
- The applicant industrial establishment shall have export related activities with the concerned scheduled bank for at least the preceding 3 months, i.e. December 2019, January 2020 and February 2020 or it must have paid the salaries of its employees/workers through the bank during this period.
Amount of the loan and its distribution
- Export-oriented active industrial establishments can use the fund to provide salaries of its employees-workers for a maximum of 3 months, i.e. April 2020-June 2020 only.
- Commercial banks will examine the salary sheets of the employees/workers of the concerned industrial establishments and the salary of an individual employee cannot be more than the average of his last 3 month’s salary, i.e. Dec-2019, Jan 2020 & Feb 2020.
- Commercial banks will directly transfer the amount to the bank accounts (including MFS accounts) of the employees/workers.
- Commercial banks will examine the NID Card of each employee/worker of the industrial establishment taking the loan.
- No cash transactions are allowed and the money cannot be transferred otherwise than by bank accounts (including MFS account) of the employees/workers.
- If an employee/worker does not have a bank or MFS account, the industrial establishment will have to ensure that a bank/MFS is opened for him. If a bank account is opened, the scheduled bank will not be entitled to take any type of account opening charge and only the minimum deposit can be taken.
Charges and repayment procedure
- Commercial banks will provide the loan with a one time 2% service charge payable by the export-oriented active industrial establishments. No other charges can be imposed except this service charge and any other charge imposed by the government.
- The industrial establishment receiving the loan will have a grace period of 6 (six) months’ from the time of the last disbursed loan instalment, i.e. June 2020. Afterwards, the whole loan amount shall be repaid within the next one and half years in equal 18 instalments. That is, the first instalment will be due at January 2021 and the last instalment shall be paid by June 2022.
- If any loan or its instalment falls due, the loan receiver may be classified as a defaulter. The scheduled bank can impose 2% penal interest on the due instalment.
- Form A contains the application for loan from the Financial Stimulus Fund to be made by the scheduled bank.
- Form B contains the promissory note from the scheduled bank to Bangladesh Bank.
- Form C contains statement showing repayment and outstanding balances against loan from the Financial Stimulus Fund.
Written and compiled by Saqeb Mahbub, Partner & Wahid Sadiq Khan, Associate