Tuesday, June 18, 2024

Islamic banks to get refinance fund from BB

Central bank launches Tk 100cr scheme
The Bangladesh Bank on Tuesday said country’s Islamic banks and Shariah-based non-bank financial institutions would get refinance fund for the first time from the central bank.
The banks and NBFIs will get the fund to give loans to rural area-based ago-processing and small industries. A BB official told New Age on Tuesday that the central bank created the refinance scheme to the tune of Tk 100 crore for the Islamic banks and Shariah-based NBFIs in a bid to strengthen the financing programme to the small and medium enterprise sector.
The BB issued a circular to managing directors and chief executive officers of all Islamic banks and Shariah-based NBFIs asking them to sign participation agreements with the SME and Special Programmes Department of the central bank if they are interested to enjoy the refinance facility.
The BB official said that the central bank at a meeting on September 30 made a decision to create a separate refinance scheme for the Islamic banks and Shariah-based NBFIs, as they could not receive any fund from the existing refinance schemes due to their Islamic Shariah-based banking.
The BB will provide 100 per cent fund support under the refinance fund to the banks and NBFIs against their sanction of working capital and term investment worth between Tk 10,000 and Tk 10,00,000.
The agro-based industry, which will apply to take loan from the refinance scheme, must be situated outside the perimeter of divisional cities and the Narayanganj City Corporation.
The value of fixed assets (excluding the value of land and building) of the agro-based industry interested for the refinance fund must not exceed Tk 10 crore.
Funding support under the refinance scheme will be available for working capital, mid-term and long-term investment. The tenure will be one year for working capital, three years for mid-term investment and five years for long-term investment.
The profit rate realised at the client level under the refinance scheme will not exceed more than the prevailing bank rate (currently five per cent) and plus the rate of Mudaraba saving accounts of the PFIs.
The financial institutions participating in the refinance fund will have to open a ‘Mudaraba fund account’ in their book of accounts alike their Mudaraba
savings accounts, the BB circular said.
The BB will provide fund from the refinance scheme at a rate of return equal to that of MSA, the circular said.
The BB will charge profit on the funds supplied to the participating institutions at the rate of return of the MSA quoted
for the previous quarter and adjustment will be made with the realised
rate of return of MFA at the end of each year,
the central bank circular said.
A participating financial institution will have to submit application for fund support under the refinance fund against its sanctioned investment on a monthly basis along with copies of sanction advice, acceptance letters from clients and other required documents.
The application for fund against investment sanctioned during a particular month must be submitted within the five working days of the following month.
A PFI will have to mention the tentative disbursement date of the investment and it must make the disbursement within five working days from the date of receipt of fund from the BB.
If a PFI fails to disburse fund within the stipulated five working days, it will have to notify about the matter to the BB within the next three working days, the central bank’s circular said.
After the notice is received, the central bank will withdraw the fund along with profits for applicable days, the circular said.
If any PFI enjoys fund support from the refinance scheme by giving false information, the amount of fund provided
will be revoked by debiting the current account of the PFI maintained in the Motijheel office of the BB with profit double the prevailing rate in MFA or MSA.

-With New Age input

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