For the first year, the charge will be 1% of the loans that would be guaranteed by the central bank
Bangladesh Bank on Monday launched a credit guarantee scheme for cottage, micro and small enterprises, allowing banks to issue up to Tk50 lakh in collateral-free loans from the stimulus package to the businesses.
A Bangladesh Bank circular issued on the day said guarantees against loans to small businesses ranging from Tk2 lakh to Tk50 lakh would be covered under the scheme.
The formal announcement on the scheme came after the board of the central bank approved the Tk2,000 crore credit guarantee scheme on July 23.
As noted in the circular, banks can issue guarantees only against the loans which will be sanctioned under the Tk 20,000 crore stimulus package that the government announced earlier for cottage, micro, small and medium entrepreneurs.
In addition to the applicable interest, the Bangladesh Bank scheme also allows the banks to charge CMS enterprises the guarantee fees that the central bank would receive from the banks.
For the first year, the charge will be 1% of the loans that would be guaranteed by the central bank.
Banks with up to 5% of non-performing loans will be charged at a rate of 0.5% of outstanding loans after the first year, while the rate will be 0.75% for banks that have NPLs between 5% and 10%.
Banks with more than 10% NPLs will not get access to the credit guarantee scheme.
State-owned banks are exempted from the NPL-related conditions.
The credit guarantee scheme will be adequate to issue guarantees to cottage, micro and small enterprises against working capital loans amounting to Tk8,320 crore, Bangladesh Bank officials have said.
The central bank in the circular asked banks to sign agreements with the central bank’s CGS (Credit guarantee scheme) unit under the SME department to get access to the guarantee facility.
Banks will be exempted from keeping any provision against the loans that would be guaranteed.