The central bank has raised the loan limit of garment and textiles producers under its Export Development Fund (EDF) to help boost income from outbound shipment, officials said.
"It has now been decided to enhance the limit of US$ 20 million to $25 million for member mills of the BGMEA (Bangladesh Garment Manufacturers and Exporters Association) and the BTMA (Bangladesh Textile Mills Association)," said a notification issued by Bangladesh Bank (BB) Monday.
An authorised dealer bank used to borrow a maximum $ 20 million from the EDF against their foreign currency financing of input procurement for member mills of the BGMEA and the BTMA.
Mohammad Ali Khokon, vice president of the BTMA, welcomed the central bank's latest initiative, saying that it will help bring positive impact on the country's apparel and clothing sector.
Mr. Khokon, Managing Director of Metro Spinning Limited, said the BTMA member mills, which have higher production capacity, will get more benefit than smaller players the loan limit enhancement.
"We've enhanced the limit for the members of the BGMEA and the BTMA to boost the overall export income in the coming months," a BB senior official told the FE.
He also said such enhancement would also help increase the inflow of foreign currency slightly in the market.
The demand for the US dollar has recently increased due to higher import payment obligation, particularly of the capital machinery, petroleum products and consumer items including food grains, according to market operators.
Meanwhile, the central bank of Bangladesh has continued its foreign currency support to the banks to settle import payment bills, particularly for food grains, fuel oils and the capital machinery.
As part of the move, the BB sold $ 25 million directly to seven commercial banks Monday to meet the growing demand for the greenback in the market.
The central bank had resumed providing the foreign exchange support in recent months by selling the US currency to the banks aiming to keep the foreign exchange market stable.
It has sold $ 2.12 billion since July 01 of the current fiscal year (FY) to the commercial banks as part of its ongoing support, according to the central bank's latest data.
The total allocation for the EDF scheme remains unchanged at $ 3.0 billion.
"We may enhance the allocation of EDF further, if necessary," said another BB official.
Currently, the exporters are allowed to get such low-cost foreign currency loan from the commercial banks, paying at the London Inter-bank Offered Rate (LIBOR) plus 2.50 per cent interest.
Under the existing provision, the EDF financing is allowed in case of input procurement against back-to-back import letters of credit (LCs) or inland back-to-back LCs in foreign exchange.
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