Bangladesh Bank is moving to change its foreign borrowing rules after initially rejecting a proposal by Meghna Group of Industries (MGI) to take $80 million loan from the International Finance Corporation (IFC) for purchasing four ships, turning a single corporate financing dispute into a broader policy shift.
Under the proposed rules, Bangladeshi private companies may be allowed to borrow from foreign lenders within a limit calculated on the basis of their export earnings, without going through the existing approval process in the same manner, according to Bangladesh Bank officials.
The draft circular has been prepared by the Foreign Exchange Investment Department of the central bank and is expected to be issued shortly, subject to the governor’s approval, the officials said.
The move marks a sharp turn from the central bank’s earlier position. Bangladesh Bank had initially rejected the no-objection certificate application for Meghna’s IFC loan, citing repayment risks linked to foreign currency borrowing.
Officials argued that Meghna is largely an import-dependent conglomerate and that its export earnings may not be sufficient to comfortably service such a large dollar-denominated liability if the exchange rate turns volatile.
The application was filed by Modhumoti Bank PLC on behalf of Meghna Group. Meghna Group Chairman and Managing Director Mostafa Kamal is also a director of Modhumoti Bank.
After the rejection, Modhumoti Bank filed a fresh application with Bangladesh Bank on June 4, seeking reconsideration of the proposal.
While the application was under review, Bangladesh Bank Governor Md Mostaqur Rahman decided to frame a new policy for private sector borrowing from foreign sources, officials familiar with the matter said.
Several central bank officials, speaking to TIMES on condition of anonymity, said the rejection of the proposal had created pressure inside the regulator.
“We came under huge pressure after rejecting the proposal. The governor said IFC loans are necessary for the country. Discussions are also going on with IFC for financing many other projects,” one official told TIMES.
The proposed $80 million financing was arranged for the purchase of four ships.
Modhumoti Bank Managing Director Md Shafiul Azam told TIMES that the bank was merely acting as a “post office” in the transaction.
“The borrower will be Meghna Group and the lender will be IFC,” he said. “All liabilities will be borne by Meghna Group. Modhumoti Bank has no liability here. The four ships to be purchased with the loan will remain mortgaged to IFC.”
He said the vessels would operate on international routes and generate foreign currency earnings, which should enable repayment of the loan.
“The entrepreneurs thought that purchasing the ships would save foreign currency for the country and reduce the group’s own transportation cost,” he said.
The central bank’s policy dilemma is rooted in the currency risk. Bangladesh Bank spokesperson Arief Hossain Khan has previously said that foreign loans carry systemic risk because they must be repaid in foreign currency. If a borrower fails to repay, the burden may ultimately fall on the central bank and the state.
That position had also been reflected in the earlier rejection of Meghna’s loan proposal. But the latest move suggests Bangladesh Bank is now trying to create a formula-based framework under which foreign lenders can extend credit to private companies by assessing their export earnings.
The case has also exposed a regulatory distinction between companies under the Bangladesh Investment Development Authority (BIDA) and those under the Bangladesh Economic Zones Authority (BEZA).
Companies under BIDA receive initial approval for foreign loans through the scrutiny committee on foreign loans and suppliers’ credit, while BEZA-related entities require a no-objection certificate from Bangladesh Bank. The Meghna entity seeking the IFC loan falls under BEZA jurisdiction.
According to IFC and ADB records, Meghna has already received several major development financing packages from international lenders in recent years. In December 2024, IFC announced a $100 million financing package for Meghna Re-Rolling & Steel Mills Limited to set up Bangladesh’s first climate-smart steel plant. The project was projected to produce 1.5 million tonnes of steel annually and create more than 20,000 direct and indirect jobs.
In May 2023, IFC also announced up to $35 million for Tanveer Food Limited, a Meghna Group concern, to establish an automated rice mill in Bogura under IFC’s Global Food Security Platform.
Separately, the Asian Development Bank (ADB) approved a $20 million senior secured loan to Tanveer Dal Mill and Flour Mills Limited for an energy-efficient flour milling project.
