BB lowers loan interest to boost trade with Japan

The Bangladesh Bank on Sunday lowered loan interest rate to 5 percent from previous 7 percent to boost trade and investment with Japanese companies.

A central bank circular issued on the day said the loan facility would be available for the Bangladeshi companies which have a substantial number of deals with Japanese firms outside of the economic zones to be developed.

The Bangladesh Bank is implementing a project funded by Japan International Cooperation Agency (JICA). Under this there is an on-lending loan scheme to provide short, medium and long-term loans to Japanese-invested enterprises in Bangladesh, Japan-Bangladesh joint venture companies in Bangladesh and Bangladeshi enterprises having substantial business deal with Japanese companies through the accredited Participating Financial Institutions (PFIs).

Substantial number of deals means that aggregate number of deals with Japanese firms is expected to exceed $100,000 within one year after applying for the loan.

Bangladeshi companies having business contract with Japanese-invested companies in Bangladesh such as sub-contract, supply contract, service contract, among others, are also included in this category.

The loan facility would be granted from the Two-Step Loan (TSL) Component of Foreign Direct Investment Promotion Project (FDIPP) in Bangladesh.

Under the revised rules, the participating financial institutions, which have agreement with the central bank to disburse loans from the project, would receive fund from the central bank at 1.5 percent for issuing credit to their clients. Earlier, the rate was 3 percent.

Besides, the Bangladesh Bank also reduced the interest rate spread for the participating banks to 3.5 percent from 4 percent.