A series of irregularities and unhealthy practices were found by Bangladesh Bank in case of loan procedure under the Export Development Fund (EDF) for exporters.
Bangladesh Bank General Manager Kazi Sayedur Rahman came up with some observations over the unethical practices followed in getting EDF loans at lower interest rate while presenting a keynote speech at a seminar held yesterday in the capital.
The seminar titled “Export Development Fund (EDF) Towards the Growth of Textile Industry” was organised by Bangladesh Textile Mills Association (BTMA).
According to the central bank observation, banks are not checking applications as to whether the clients have overdue export bill, while submitting to Bangladesh Bank for EDF loans on behalf of exporters.
BB observed that the applications for time extension of loan payment are submitted without taking sign from appropriate authorities.
Applications are not scrutinised properly by the financing banks before submission to the central bank.
Syedur said some banks do not provide relevant information to BB on or before the loans maturity which caused unnecessary delay to get fund from the central bank.
BB observed that some banks are charging higher interest rate at 7% to 14% on the exporters for delaying the release of fund from central bank.
Bangladesh Bank is planning to receive application online to prevent the tendency of placing false documentation, said Syedur.
Currently, the number of total members of different business associations is 9,126, of which 1,271 members have borrowed EDF loans, according to the Bangladesh Bank data.
Of the total $2bn EDF, around 14% loans went to the exporters and the annual turnover of EDF is $3.50bn.
Of the business association, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is enjoying the highest 56% portion of the total EDF followed by BTMA 21%, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) 11% and the remaining fund goes to other associations.
The single borrower exposure limit of loans under EDF is $15m for BGMEA, BKMEA, BTMA and Bangladesh Dyed Yarn Exporters Association (BDYEA) members and $2m for others.
EDF loan is provided for six months and charged interest is LIBOR plus 4%. Of the interest LIBOR plus 1.5% is charged by Bangladesh Bank and LIBOR plus 2.5% by financing banks.
The World Bank has taken a new project to form a separate EDF fund to provide loan for a long time to promote exporters. The global lender may provide $300m for the fund and Bangladesh Bank will also contribute with $200m to the fund, according to BB officials.
“Bangladesh Bank is consistently expanding the EDF fund size in line with increasing foreign exchange reserve,” said Ahsan Ullah, executive director of central bank.
He said despite having negative impact of the fund in the market, the World Bank does not interfere in the decision of fund expansion as EDF was formed according to the prescription by the global lender.
Bangladesh Bank retained the dollar rate by managing EDF fund. Exporters, however, are being benefited by retaining dollar rate up by managing EDF fund, but importers and remitters are being loser.
The central bank is trying to accommodate all importers, exporters and remitters in its consideration, Ahsan said.
Tapan Chowdhury, president of BTMA, requested Bangladesh Bank to extend the loan duration three months more from existing six months and single borrower exposure limit to $25m.