Loan
Bangladesh Bank forms selection committee to support loan recovery
In response to various external economic challenges, Bangladesh Bank has formed a five-member selection committee to provide policy support for restructuring the businesses and financial operations of affected borrowers.
Officials said the initiative aims to stabilise the banking sector and sustain economic activities amid ongoing global and domestic uncertainties.
The committee consists of representatives from Bangladesh Bank, the Ministry of Finance, and the private sector.
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The committee is convened with Mezbah Ul Haque, Executive Director of the Off-site Supervision Department at Bangladesh Bank, with Dr Delwar Hossain, Joint Secretary of the Financial Institutions Division; Mamun Rashid, Economist; and Abdul Haque, Business Representative from Haq’s Bay, as members, while Shahriar, Director of the Banking Regulation and Policy Department, serves as the Member Secretary.
Many businesses in Bangladesh have suffered financial setbacks due to factors beyond control, including the COVID-19 pandemic, the Russia-Ukraine war, global economic downturn, floods and political disruptions.
To mitigate the impact and ensure loan recovery, the newly established committee will recommend necessary policy measures to rehabilitate affected businesses, ensuring their viability and profitability, according to the officials.
The selection committee will assess whether borrowers have genuinely suffered due to uncontrollable circumstances. Furthermore, it will evaluate the feasibility of restructuring distressed businesses through policy assistance, enabling them to regain operational efficiency and repay their loans.
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Spokesperson Husne Ara Shikha confirmed that there is no fixed time limit for the committee’s task completion. However, members can receive remuneration for up to two meetings per month, she said.
Shikha said the committee’s scope includes loans amounting to Tk 50 crore or more that have been classified due to external economic factors. Its recommendations will focus on policy-driven solutions to restore business sustainability and enhance financial stability in the banking sector.
16 days ago
IMF delays decision on Bangladesh's $4.7 billion loan tranche until March
The release of the fourth tranche of Bangladesh’s $4.7 billion budget support loan from the International Monetary Fund (IMF) has been deferred until March, primarily due to scheduling adjustments caused by natural disasters.
A senior official at Bangladesh Bank (BB) told to UNB that the matter was initially set for discussion in the IMF executive board meeting on February 5. But the meeting has been postponed, with the new date set for March 12.
The IMF's month-long closure of activities, prompted by natural disasters, is cited as the main reason behind the change in the schedule.
The global lender has emphasised several conditions tied to the loan's release. One critical demand is the liberalisation of the US dollar exchange rate, which the central bank is reportedly aligning with market trends.
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Another major point of contention relates to revenue collection targets set for the National Board of Revenue (NBR).
While IMF officials have raised concerns regarding these targets, an NBR source has stated that measures to enhance revenue collection are already underway and there are no significant hurdles from their side.
The fourth tranche, amounting to $645 million, follows three previous installments under the loan program.
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Meanwhile, Bangladesh has requested an increase of $750 million in the overall $4.7 billion package.
The IMF has agreed to this request but has set strict conditions, including increased revenue collection and structural changes like separating tax collection from policy-making.
25 days ago
Rising interest payments reflect growing dependence on loans, increasingly from foreign sources
The government will have to pay some Tk 2915 billion (Tk 29,150 crore) in the next two fiscals for Interest payments, as it looks to service the debt it has built up over the years under a neoliberal paradigm.
Of the total, Tk 1370 billion (13,700 crore) will be needed for 2025-26 fiscal while Tk 1545 (15,450 crore) billion for 2026-27 fiscal, according to an official document of the Finance Ministry.
In 2025-26, Tk 1140 billion will be needed to pay domestic interest while Tk 230 billion for external interest rate.
For 2026-27 fiscal, the projection is Tk 1285 billion for domestic interest payment and Tk 260 billion for external interest payment.
In the running 2024-25 fiscal, the estimation of the interest payment is Tk 1130 billion. Of the amount, Tk 930 billion will be required for domestic purpose while Tk 200 billion for external.
Overall, the Interest payments projection illustrates a rising tendency in the government's interest expenditure over the years.
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Interest payments were Tk 777.7 billion in FY22, of which Tk 732 billion was for domestic interest payment while Tk 45.6 billion for external interest payment.
As a proportion of the total budget, interest payments exhibit some fluctuation, starting at 15.3 percent in FY22, decreasing to 13.5 percent in FY24, and gradually rising again to 15.3 percent in FY27.
Domestic interest payments form the majority of total interest expenditure, projected to rise from Tk 732.18 billion in FY22 to Tk 1,285 billion in FY27.
The share of domestic interest payments in the total budget is estimated to decrease initially, from 14.1 percent in FY22 to 11.7 percent in FY25, before increasing back to 12.7 percent in FY27.
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External interest payments, although a smaller portion of the total, are projected to increase significantly from Tk 45.6 billion in FY22 to Tk 260 billion in FY27.
The proportion of external interest payments in the total budget is also expected to rise from 0.9 percent in FY22 to 2.6 percent in FY27, reflecting an increasing impact of external debt on the budget.
Although roughly 40 percent of the deficit financing came from external sources in recent years, interest expenditure on domestic loans has been significantly higher than the interest expenditure on foreign loans.
This is due to the fact that most of the external loans that Bangladesh received from its developed partners are in concessional terms, while most of the domestic loans have been borrowed at market rates.
However, because of the tight monetary policy adopted by the advanced countries since 2022, interest expenditure on foreign loans is gradually increasing.
Interest expenditure on foreign loans are expected to remain above 2 percent in total expenditure in the medium-term primarily for two reasons- (1) reference rates in advanced countries are expected to remain elevated in the near future and (2) graduation from group of LDCs will gradually shrink the window for Bangladesh to get concessional loans from external sources.
The overall implicit interest rate on financing remains relatively stable throughout the period, ranging between 6 percent and 6.8 percent.
This indicates that the government's overall cost of borrowing is well-managed and remains within a predictable range.
The implicit interest rate on domestic borrowing shows a period of higher rates in FY24 and FY25, reaching 9.1 percent in FY24 and peaking at 9.6 percent in FY25.
This spike is primarily due to high inflation and tight monetary policy during these years. However, inflation is expected to ease in the medium term, leading to a potential reduction in both the central bank policy rate and domestic interest rates.
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Consequently, the implicit interest rate on domestic borrowing is projected to decline to 9.4 percent in FY26 and further to 8.2 percent in FY27.
The implicit interest rate on external borrowing exhibits a gradual increase over the period, starting from 1 percent in FY21 and rising to 2.6 percent in FY27.
This increase is attributed to a higher proportion of borrowing through floating and semi-concessional rates, which are more sensitive to market fluctuations compared to fixed-rate financing.
1 month ago
Banks won’t charge extra fees for late payment of credit cards bills, loan installments: Bangladesh Bank
Considering the current situation, Bangladesh Bank has instructed all banks and financial institutions to not charge any extra fees for late payment of credit card bills, and loan installments.
The central bank issued a directive to banks and financial institutions in two separate notifications in this regard on Wednesday.
Those who had time to pay their loan installments, credit card bills, and savings deposit installments during the curfew and public holidays can make the payments till July 31. Bangladesh Bank has said that banks and financial institutions will not collect any additional interest, penalties or late fees for installments/card bills payable between July 18 and 25. No savings scheme can be canceled due to failure to pay installment during this time.
According to the central bank notification, many borrowers and credit card users have not been able to pay their dues to the banks on time due to the current situation.
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Besides, many depositors could not deposit installments of various savings schemes including Deposit Pension Scheme (DPS) on time. Under the circumstances, the new guidelines will be effective from July 18 to 25 in respect to dues of loans, credit card bills, and installments of various savings schemes including DPS.
The Bangladesh Bank directive stated that if the loan and credit card dues are paid by July 31, any interest or profit and penalty interest, additional interest, excess profit, late fee on the outstanding amount will be deducted. If installments of savings schemes are paid by July 31, no late fee or penalty can be collected.
Apart from this, interest or profit and penalty interest or late fee on any loan or credit card and any kind of late fee or penalty on various savings schemes that has already been collected has to be refunded or adjusted.
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6 months ago
What to Consider Before Taking a Personal Loan from a Bangladeshi Bank
Personal loans are a great option for those looking to make a big financial decision in their life. It could be buying a new car, planning a wedding, going on a vacation abroad, paying for higher studies, or getting a new home. Personal loans offer secured debt consolidation as they cover tons of financial needs. While taking out a personal loan is pretty straightforward, you should consider some key aspects before going for one.
Things to Consider Before Taking Out a Personal Loan from a Bangladeshi Bank
Purpose of the Loan
Personal loans are mostly taken as a form of investment source. It can be debt consolidation or a major investment for future benefit. Regardless, a loan means incurring a liability until it is paid off. It is important to properly assess whether taking the loan is a feasible decision or not.
It is also important to consider alternative funding sources like personal savings, emergency funds, or borrowing from family.
Interest Rate
One of the prime things to consider is the interest rate accrued to the loan capital. Currently, Bangladesh Bank has a regulation in place that outlines the upper limit that can be charged by the banks. The Bangladesh Bank interest rate regulation can be checked from the lending rate of scheduled banks (https://www.bb.org.bd/en/index.php/financialactivity/interestlending).
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Additionally, a borrower can use websites like aamartaka.com to compare the rates among banks, check eligibility criteria, and even apply through their designated channels.
Understand the Eligibility Criteria
The first thing to consider while applying for a personal loan is to understand the eligibility criteria. Personal loans can come in both secured and unsecured options. Granted that the unsecured options will incur a higher interest rate.
However, most banks require a set of eligibility criteria for one to apply for a loan. For example, the valuation of collateral against the loan or the liquidity level of the applicant. Other aspects like personal history verification, job verification, income, and salary credit account can also be the eligibility criteria depending on the lender. Another key aspect is the history of bankruptcy or loan default which might disqualify a person from applying for a personal loan.
Have a Good Credit Rating
A credit history is one of the key determinants of loan disbursement abroad. One can’t even apply for a credit card without a stable credit rating, let alone a personal loan. Credit rating determines the creditworthiness of an individual, that is how likely they are to repay a loan based on previous credit history.
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There are several credit scoring systems globally like FICO score and VantageScore. However, in the case of Bangladesh, the banks and NBFIs do not follow a set credit score while approving loans. Alternative credit scoring like asset ownership, utility payments, device data, and rental payments are taken into consideration. It is mostly because a large portion of the demographic is unbanked or underbanked to make credit scoring the sole determinant for loan approval.
7 months ago
Publish list of loan defaulters who laundered money abroad in JS: AK Azad
Independent MP AK Azad on Monday (February 12, 2024) demanded a list of those who have laundered money abroad taking loans from banks be placed in Parliament.
Azad, who was elected MP for the first time, came up with the demand while participating in the discussion on the thanksgiving motion on the President’s speech.
He said that Prime Minister Sheikh Hasina is totally against corruption and Awami League's manifesto also cited that.
“First of all, good governance will have to be established in the banking sector,” Azad said.
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Welcoming Bangladesh Bank's roadmap for reforming the banking sector, Azad, also President of Newspapers Owners Association of Bangladesh (NOAB), said the amount of defaulted loans in Bangladesh is around Tk 1,45,633 crore.
“But in reality, the amount is much more. But through write off, the amount of debt is shown less. Those who have taken loans and invested in factories and failed to repay, may be exempted subject to investigation,” he said.
He demanded to bring to justice those who did not invest loan money in any business, and instead laundered the money.
“They made home at Begum Para, and second homes. Their list should be published in the parliament,” he demanded.
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He also commented that Bangabandhu's dream will not be realised unless they are brought under the law.
The independent MP said that those who looted banks are responsible for the rise in commodity prices and inflation.
Azad said that he wants to be accountable to the countrymen and voters through this parliament.
Azad also said he wants to make the parliament effective and lively through constructive criticism of the government.
He expected cooperation of the Speaker in this regard.
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1 year ago
Macron says France will sign agreement with Bangladesh to finance climate-change adaptation, loss and damage in first half of 2024
French President Emmanuel Macron has said his country will sign an agreement with Bangladesh to finance climate-change adaptation and loss and damage in the first half of 2024.
The French Development Agency will be contributing €1 billion ($1.1 billion) in investment, and the IMF will be extending up to $1 billion worth of SDRs in new loans, Macron said.
"This also implies identifying, on a global scale, governance mechanisms for the most crucial challenges we will have to face in the coming years, access to water being one of the most pressing. In this regard, France and Kazakhstan will convene a One Water Summit during the United Nations General Assembly in September 2024," wrote the French president in an article, titled "Pillars of Green Wisdom," published by the Project Syndicate.
For the most vulnerable countries, he said, they must create conditions that enable them to finance their climate-change mitigation and adaptation efforts and access the green technologies that are the new engines of growth.
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"This implies going further than traditional ‘official development assistance’ and doing for vulnerable countries what rich countries did for themselves during the COVID-19 pandemic: pursue an unorthodox fiscal and monetary policy," wrote President Macron.
"The results are already there: in two years, following the initiative we took in Paris in the spring of 2021, we have released over $100 billion in special drawing rights (SDRs, the International Monetary Fund’s reserve asset) for vulnerable countries," he wrote.
By activating this “dormant asset,” Macron said they are extending 20-year loans at near-zero interest rates to finance climate action and pandemic preparedness in the poorest countries.
"We have begun to change debt rules to suspend payments for such countries, should a climate shock occur. And we have changed the mandate of multilateral development banks, such as the World Bank, so that they take more risks and mobilize more private money," he said.
Macron said they are going to continue working on this, including within the framework of the new loss and damage fund, where they must mobilize new private insurance mechanisms in the face of climate risk. "We will start from the specific needs of the hardest-hit countries."
The French president said they will not succeed if they cannot reform the World Bank and the IMF, which play a prominent role in establishing the norms and financing the green transition on a global scale.
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Eighty years after their creation, these institutions remain underfunded, relative to the size of the global economy and population, and emerging and developing countries continue to be shut out of their governance, he said.
"But we will not be able to agree on goals and financing until every country negotiating is on an equal footing.To this end, we must review Bretton Woods governance, and ask emerging countries to assume their share of accountability in financing global public goods," said Macron.
He said, “We must not allow the ongoing war in Ukraine and the fighting in Gaza to distract us from collective efforts to reduce our greenhouse-gas emissions, achieve carbon neutrality by 2050, save our biodiversity, and fight poverty and inequality.”
The world’s most advanced economies, which have also been the main CO2 emitters since the industrial revolution, must move away from fossil fuels, he noted.
He also wrote, “Science has set the trajectory: we must move away from coal by 2030, from oil by 2045, and from gas by 2050. While the G7 countries bear the greatest responsibility, China, which is now the second-largest emitter in history, must be fully committed, too.”
“While it is the G7’s responsibility to move away from coal by 2030 (France will have done so in 2027), emerging economies are now the biggest coal consumers. In these countries, we need to speed up the financing of renewables, as well as nuclear power, which, as a manageable and a decarbonized energy source, must play a key role,” he wrote.
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“We must also put private financing and trade at the service of the Paris agreement. The cost of investment must be higher for players in the fossil-fuel sector. We need a green interest rate and a brown interest rate. Similarly, we need a climate clause in our trade agreements, because we cannot simultaneously demand that our industries become greener while supporting the liberalization of international trade in polluting products.
“Moreover, we must focus on building the basis of a ‘bio-economy’ that will pay for the services provided by nature. Nature is our best technology to sequester carbon on a large scale. The countries with the most important carbon and biodiversity reserves, especially in the three main tropical forest basins, must obtain much greater resources, determined on a country-by-country basis, in exchange for their stewardship of these vital reserves. France has already launched three contracts of this type at COP28, with Papua New Guinea, the Republic of the Congo, and the Democratic Republic of the Congo,” Macron wrote.
“But reform of the voluntary carbon market is essential. We need to create an international carbon and biodiversity exchange that will allow governmental and private actors to organize voluntary carbon credit swaps, based on sufficiently ambitious criteria to avoid greenwashing, and to remunerate local communities.
“The ocean is our most important carbon sink, and we must protect it. France and Costa Rica will convene the third United Nations Ocean Conference in Nice in June 2025, with the aim of updating international law, including on the prohibition of plastic pollution and on protection of the deep sea and seabed. These reforms would also enable the development of national strategies for seaboard protection by countries with exclusive economic zones,” the French president wrote.
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1 year ago
Boosting Dhaka’s connectivity: Japan funding for Hazrat Shahjalal Airport’s major upgrade
In a significant development for Bangladesh’s aviation sector, the country and Japan today signed the exchange of notes of the 44th Official Development Assistance (ODA) yen loan. This crucial funding, amounting to 76,635 million yen (approximately USD 540 million), is earmarked for the expansion of Dhaka’s Hazrat Shahjalal International Airport (HSIA).
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The installment will be used for constructing Hazrat Shahjalal International Airport’s Third International Passenger Terminal, a Cargo Terminal, and associated facilities.
The agreement was formalized by Iwama Kiminori, Japanese Ambassador to Bangladesh, and Md. Shahriar Kader Siddiky, Secretary of the Economic Relations Division, Ministry of Finance. This latest installment brings the total of the 44th round of yen loans to a substantial 324,191 million yen (around USD 2.21 billion).
A corresponding loan agreement was signed by Yoshida Hiroshi, Senior Representative of JICA's Bangladesh Office, and Shariar Siddiky, emphasizing the commitment to meet the growing aviation demands, enhance airport capacity, improve accessibility, and bolster security. This expansion is anticipated to significantly contribute to Bangladesh’s economic development and regional connectivity.
Prime Minister Sheikh Hasina, at the recent soft opening of Dhaka Airport’s Third Terminal, highlighted the importance of Japanese companies’ involvement in this grand project. Ongoing intensive discussions between the Japanese consortium and airport authorities reinforce Japan’s commitment to fostering Bangladesh’s development through this strategic partnership, aiming for mutual prosperity.
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The 44th ODA loan package specifically targets the Hazrat Shahjalal International Airport Expansion Project (Phase III). The terms include an interest rate of 1.30% per annum, with a repayment period of 20 years following a grace period of 10 years, as outlined by the Japanese Embassy in Dhaka. This agreement marks a pivotal step in enhancing Dhaka’s status as a key aviation hub in the region.
1 year ago
3 Bangladeshi universities to get $100 million from ADB to improve CSE, IT programs
The Asian Development Bank (ADB) and the Government of Bangladesh on Tuesday (November 28, 2023) signed a $100 million loan agreement to improve computer science, software engineering, and information technology (IT) programs in three universities in Bangladesh.
Md. Shahriar Kader Siddiky, Secretary, Economic Relations Division (ERD), and Edimon Ginting, Country Director, ADB, signed the loan agreement on behalf of Bangladesh and ADB, respectively, at a ceremony at ERD in Dhaka.
“This project will help accelerate fourth industrial revolution technology adoption, realize the vision of Digital Bangladesh, and enable the country to reap the demographic dividend by creating digitally qualified young human resources and entrepreneurs,” said ADB Country Director Edimon Ginting.
“This new initiative builds on ADB’s ongoing skills development support through industry partnerships to increase competitiveness and foster innovation,” he said.
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The Improving Computer and Software Engineering Tertiary Education Project will upgrade the computer science and engineering, software engineering, and information technology degree programs of the leading public universities in Bangladesh. The universities receiving the funding are: Bangladesh University of Engineering and Technology (BUET), University of Dhaka (DU), and Jashore University of Science and Technology.
These programs will adopt blended learning techniques and integrate the latest technologies such as artificial intelligence, robotics, and internet of things.
These programs will seek international accreditation to ensure that students get updated curricula that adhere to international standards.
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ADB will support the establishment of modern classrooms and laboratories, collaboration and start-up spaces, and auxiliary facilities in the three universities.
These facilities will incorporate climate- and disaster-resilient designs, energy- and water-saving features, and will include women-friendly amenities and services.
The universities will develop capacities of teachers to be proficient in new instructional approaches and emerging digital technologies.
The students and teachers from the three and other universities will also work with industry partners to come up with innovative solutions through joint research and development.
Mandatory internship opportunities, career counseling, and industry placement will be provided to undergraduate students, particularly for women.
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1 year ago
Bangladesh can support EU’s efforts to diversify production of pharmaceuticals, vaccines: PM tells EIB President
European Investment Bank (EIB) President Dr Werner Hoyer has appreciated the use of Euro 1 billion loan portfolio for Bangladesh since 2000 in areas of shared priorities.
He noted, in particular, progress in projects – under implementation – under water treatment and rail link upgradation.
Prime Minister Sheikh Hasina held a meeting with the EIB President recently at her hotel suite in Brussels.
The prime minister referred to the achievements made so far in ensuring safe water and sanitation for nearly 97 percent of the population in Bangladesh.
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She requested EIB to consider supporting river dredging, water conservation, and surface irrigation.
PM Hasina also mentioned the initiatives taken by her government to develop dual-track railway, to promote cost-effective passenger and container traffic.
She appreciated the interest of multilateral development banks in financing such impactful connectivity projects.
The EIB president referred to the loan package of Euro 250 million signed in 2021, said the Ministry of Foreign Affairs on Thursday (October 26, 2023).
He shared that the disbursement of the amount would commence soon for the purpose of health system strengthening.
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The EIB president observed that Bangladesh was in an ideal situation to roll out vaccine production.
The prime minister informed him about the measures taken by the government to develop a vaccine production facility and a molecular testing laboratory.
She suggested that EIB extend support for necessary infrastructure development for these initiatives.
She reiterated that Bangladesh could support EU’s efforts to diversify production of pharmaceuticals, vaccines and medical equipment.
She also discussed possible support measures for combating dengue outbreaks, including through vaccines.
The EIB is the largest multilateral public bank in the world.
In 2022 it financed around Euro 10.8 billion in investments outside the European Union via EIB Global, the arm of the bank created that year for activities beyond Europe.
Since the beginning of its operations in Bangladesh in 2000, the EIB has supported six projects in the country and has invested more than Euro 670 million in water, transport and health projects.
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END/UNB/MK/KW
1 year ago