The state-owned Trading Corporation of Bangladesh (TCB) seeks a transition to private credit lines instead of relying on costly state bank loans to slash its soaring interest burden, sources said.
To this end, the entity has requested the Ministry of Commerce to take the necessary steps. Currently, the TCB has to secure Loan Against Trust Receipts (LTR) from state-run banks at a high interest rate of 12.20 per cent, which increases the government's financial burden.
Previously, the TCB made supply payments through letters of credit (LCs) and LTRs obtained from state-run banks, including Sonali Bank.
The maturity period of these LTRs is generally 270 days, with a 12.20 per cent interest rate calculated on a quarterly basis upon maturity.
In contrast, private commercial banks have offered LTRs with an interest rate of 11 per cent to 12 per cent, which is 0.20 per cent to 1.20 per cent lower than those of state banks, according to the TCB.
The agency noted that other state corporations, such as the Bangladesh Petroleum Corporation (BPC), Bangladesh Chemical Industries Corporation (BCIC), and Bangladesh Agricultural Development
Corporation (BADC), have long been opening LCs through private commercial banks. Currently, the government issues sovereign guarantees in favour of these state bank loans.
At present, the TCB procures essential commodities worth around Tk60 billion annually.
Explaining why private bank loans are more cost-effective, the TCB highlighted that around Tk 800 million could be saved annually if the agency secures private bank financing at an 11 per cent interest rate.
It also mentioned that the TCB currently pays Tk7.80 billion in interest annually on state bank loans, which is Tk 800 million higher than what it would pay under private bank lending terms.
When contacted, a senior TCB official said that the government would be able to save financial resources and reduce its subsidy requirements if the TCB is allowed to secure lower-interest loans from private commercial banks.
He believes that taking everything into account, the government should grant the required approval so the TCB can transition to private bank financing.
The government's trading arm has already requested the commerce ministry to determine the next course of action. A ministry official confirmed that the proposal is currently under scrutiny.
The TCB currently operates a monthly sales drive of essential commodities, catering to 10 million low-income families who hold smart family cards.
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