The Bangladesh Bank (BB) has relaxed its regulations on external borrowing for fully foreign-owned industrial enterprises in a bid to attract fresh foreign direct investment (FDI) in Bangladesh.
Under the revised rules, fully foreign-owned industrial enterprises will be allowed to borrow from their parent companies, associate entities and overseas shareholders under a general authorisation framework, facilitating easier access to external financing.
"We've relaxed the rules on overseas borrowing by fully foreign-owned industrial enterprises, operating in Bangladesh, from their parent companies that will facilitate fresh inflows of FDI," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE), explaining the objective behind the latest policy move.
He also said the government and the central bank are working to attract fresh FDI to support the country's sustainable economic development.
The BB's latest move comes against the backdrop of falling trend in the FDI despite having efforts from the government and the regulator to improve the investment climate and attract foreign investment.
Net inflow of FDI fell by more than 15 per cent to US$1.13 billion during the July-May period of the outgoing fiscal year (FY) 2025-26 over that of $1.55 billion in the corresponding period of FY '25, according to BB's latest data.
However, eligible manufacturing and service-sector enterprises operating both within and outside specialised zones, including EPZs, EZs and High-Tech Parks, will be able to obtain short, medium and long-term foreign loans subject to specified conditions, according to a notification issued by the central bank on Wednesday.
For short-term borrowing of less than one year, companies outside specialised zones may obtain interest-free loans for working capital purposes without prior approval from the central bank.
They may also avail cost-bearing loans at an all-in-cost of up to 3.0 per cent per annum for bona fide business purposes, including input procurements.
Such loans must be repaid in a bullet payment at maturity and may be rolled over for a maximum aggregate tenor of three years.
For medium-term borrowings of one to five years, the central bank has allowed interest-free loans of up to US$ 50 million and cost-bearing loans of up to $5.0 million for capital expenditure, including the purchase of machinery, equipment and construction.
Long-term borrowings of more than five years will also be allowed, with borrowing costs capped at 3.0 per cent per annum where applicable, the central banker explained.
The central bank also allows outstanding borrowings to be converted into equity subject to existing regulations.
Industry insiders also believe that the new measures are expected to improve access to affordable overseas financing and encourage greater foreign investment in Bangladesh.
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