Bangladesh Bank has tightened safeguards under its Tk20,000 crore financing scheme for closed industrial and service-sector enterprises, requiring borrowers to declare they have no record of financial misconduct and directing banks to track all project-related transactions through designated accounts.
The central bank has also changed the facility from a pre-financing scheme to a refinancing scheme, revised borrower-selection conditions and given priority to enterprises that have already taken project loans from the same bank.
In a circular issued on Thursday, the Banking Regulation and Policy Department-1 instructed all scheduled banks to follow the revised guidelines with immediate effect.
Under the new rules, banks must obtain declarations from prospective borrowers confirming that they have not previously been involved in money laundering, fraud, fund diversion or misuse of loan proceeds.
The requirement adds a layer of scrutiny to borrower selection under a facility designed to help closed businesses resume operations.
Banks have also been instructed to prioritise applicants who have already obtained project loans from them when considering financing under the scheme.
Another key safeguard requires all transactions involving loans and investments under the facility to pass through escrow or revenue accounts. This will allow banks to monitor the movement and use of funds.
Banks must also follow existing Bangladesh Bank guidelines on opening project income accounts when disbursing project loans.
The country’s industrial sector has faced persistent financing and operational challenges, leaving some enterprises struggling to maintain production and services. Financial constraints, weak business conditions and accumulated liabilities can make restarting closed businesses particularly difficult.
But lending to non-operational enterprises also exposes banks to significant risks, particularly if the reasons for closure, existing liabilities and viability of proposed operations are not properly assessed.
The Tk20,000 crore scheme was introduced to facilitate financing for closed industrial and service-sector enterprises. Its success depends not only on the availability of funds but also on borrower selection, project viability assessments and effective monitoring of loan utilisation.
The revised rules seek to strengthen these safeguards by making borrowers accountable for their previous financial conduct and keeping project-related transactions within the formal banking system.
Bangladesh Bank has also set a deadline for banks seeking refinancing. After disbursing a loan, the concerned bank must submit an application with the required documents to the Banking Regulation and Policy Department-3 within the following week.
The application must be approved by the bank’s board of directors or its Board Executive Committee under delegated authority.
If a bank misses the deadline, it may submit the application within the following 15 days, explaining the reasons for the delay.
The circular also replaces the term ‘pre-finance scheme’ with ‘refinance scheme’ in the relevant guidelines and participation agreements signed with banks.
Issued under Section 45 of the Bank Company Act, 1991, the revised instructions took immediate effect.
