(BANGLADESH BANK GUIDELINES FOR FOREIGN EXCHANGE TRANSACTIONS, Volume-1 Instructions as of 31 May, 2009 issued to Authorised Dealers and Money Changers in Foreign Exchange)
17. (A) 100% foreign owned enterprises in the EPZs known as Type A industries may obtain short term foreign currency loan from overseas banks and financial institutions subject to the following conditions:
(i) The loan shall be received through an AD in Bangladesh; and the loan proceeds will be credited to the FC account maintained by the AD in the name of the Type-A unit, to be used for financing import of capital machinery and raw materials, payment of interest / service charges, repayment of loans and for crediting Taka account for meeting local expenses;
(ii) Only assets fully owned by the Type-A industry may be lodged as collaterals for such loans;
(iii) Repayment of principal and interest on the loan shall be remitted out of the balances available in the FC account without prior Bangladesh Bank approval. No fund may be provided from the AD’s own resources for such repayment except with prior approval of Bangladesh Bank;
(iv) In case the loan is called up by the creditor, the assets charged to foreign lender will be allowed to be sold only in foreign exchange and proceeds, after paying off all local liabilities in Bangladesh, may be remitted abroad with Bangladesh Bank’s approval;
(v) No Taka loan against repatriable short term foreign currency loan will be allowed to a Type-A industry.
(B) Type-B industries (joint venture projects) may also obtain such loans subject to conditions applicable to Type-A industries as indicated above, except that Type-B industries will not be permitted to mortgage / hypothecate their fixed assets, raw materials in favour of any non-resident. The ADs may, however, issue guarantee to overseas banks / financial institutions for short term foreign currency loans brought into Bangladesh by Type-B industries, subject to prior approval of the Bangladesh Bank.
18. Taka loan may be granted to a joint venture (Type-B) industrial unit in EPZ up to 100% of short term foreign currency loan brought in and encashed to taka. Loan in Taka for procurement of capital machineries for setting up a Type-B industry, not exceeding the local partners’ share of ownership of the unit, may be extended on normal banker-customer relationship. Prior Bangladesh Bank approval should be obtained by the AD while providing foreign exchange for import of the machineries out of the Taka loan. Repayments of the Taka loans along with interests should be received out of the foreign exchange earnings of the unit.
19. ADs may extend credit facilities to Type-C industries (100% locally owned) as admissible to such industries outside EPZ.
20. In establishing import LCs on account of Type-A, B and C units in the EPZs ADs shall bear in mind the position that the import payments may be made only out of the foreign exchange earnings of the concerned units or out of their borrowings abroad credited in their FC accounts, and that no funds from the ADs own foreign exchange resources can be used for this purpose. Before opening inputs import LC against an export LC or export order received by an EPZ unit the AD should satisfy itself completely about the clarity of the conditions in the export order / LC, the standing and credit of the foreign buyer and the ability of the exporting unit for timely execution of the export order. In opening inputs import LCs on account of Type-B and Type-C units, domestic value addition requirements prescribed for the respective items by the Ministry of Commerce should also be abided by.
Import payments against the LCs should be scheduled in a manner that payment obligations do not fall due before receipt of export proceeds. In all cases of opening inputs import LCs on accounts of units in the EPZ, ADs should satisfy themselves that necessary arrangements have been made by the opener that in case of shortfall or delay in export receipts, foreign exchange would be made available form external sources.
21. In the case of joint venture (Type-B) projects in the EPZs, the foreign partners will have to arrange their contributions in foreign exchange from own or borrowed sources outside Bangladesh and the local partners shall contribute their shares in local currency. In the event, however, the contributions as per joint venture project agreements made by the foreign partners are not sufficient to cover the cost of machinery and equipment, the shortfall may be made up, with prior Bangladesh Bank approval, by conversion of Taka into foreign currency up to an amount not exceeding the local partners’ shares / contributions referred to above.
22. Bangladesh in NFCD accounts may be utilized for discounting usance bills drawn by Type-A and B units of EPZs for supplying raw materials under back to back (BTB) arrangement and accepted by ADs operating outside EPZs. However, utilization of NFCD fund for the above purpose including payment for BTB sight LCs (as mentioned in Chapter 7) will not exceed 50% of total NFCD balance of the concerned bank.
23. For working capital, in addition to pre-shipment non-funded facility through BTB LC and post shipment finance through bill discounting as mentioned in para 22 of this chapter, an AD may grant working capital loan from its own source on banker customer relationship considering repayment capacity of the B and C Type units up to the extent of value of inputs required for four months production. However, loans so advanced should be adjusted form export receivables within shortest possible time. The amount of importable is to be determined on the basis of export performance of the concerned unit during the previous year while for the new concern the AD should refer to the production capacity as determined by BEPZA.
N. B.: To be read in conjunction with other instructions, subsequent amendments and modifications issued from time to time.