The Bangladesh Bank would inject Tk 50,742.5 crore into the money market in the form of refinance scheme out of the government-announced stimulus packages to support the businesses and farmers to overcome the impact of coronavirus pandemic.
The government has so far announced stimulus packages worth around Tk 75,742 crore for different businesses which are bank-loan dependent.
As part of the BB’s move to inject money into the banking system, the BB on Sunday announced a Tk 10,000-crore revolving refinance fund with its own fund to support the implementation of the Tk 20,000-crore stimulus package announced by the government for the micro, small and medium enterprises, including cottage industries.
A BB circular issued on Sunday said that the refinance fund would support the banks and non-bank financial institutions in implementing the government-announced Tk 20,000 crore refinance fund for the cottage, micro, small and medium entrepreneurs.
Apart from the Tk 10,000 crore, the BB, since the announcement of stimulus packages by the government to support the economy on March 25, formed Tk 15,000 crore revolving refinance fund to support the banks with liquidity to implement the Tk 30,000-crore stimulus package meant for the coronavirus outbreak-affected entities in the industry and service sectors.
Besides, the central bank formed a Tk 5,000-crore pre-shipment refinance scheme for the export-oriented industries and another Tk 3,000-crore fund for the low-income people and for the farmers.
The BB also launched another Tk 5,000 crore fund for the farmers, setting the interest rate at 4 per cent for the farmers.
The central bank also enhanced the size of its export development fund by $1.5 billion (Tk 12,742.5 crore) to $5 billion to support the exporters.
Policy Research Institute executive director Ahsan H Mansur told New Age, ‘The formation of refinance scheme or injection of money by the central bank into the money market is same as the issuance of money or printing money by the central bank.’
It is a very much required move of the BB, he said, adding that the success of the move would depend on efficient distribution of loans and refraining defaulters from availing the scope.
‘Whether the amount to be injected would be enough or not would depend on the disbursement situation as well as on the actual need of the businesses,’ said Ahsan, also the chairmen of BRAC Bank.
Besides launching funds, the central bank also reduced the cash reserve ratio of the banks to 4 per cent from 5.5 per cent.
The money market regulator also lowered the repurchase agreement (REPO) rate to 5.25 per cent from 6 per cent.
As per the BB’s circular issued on Sunday, the banks and non-bank financial institutions would be entitled to get fund from the central bank’s refinance scheme at 4 per cent interest.
The banks and NBFIs would get 50 per cent as refinance from the BB against the loans they would disburse to the coronavirus affected cottage, micro, small and medium businesses.
The Tk 10,000 refinance scheme, formed with the BB’s own fund, has been launched for a period of three years, the BB circular said.
On April 13 this year, the central bank, in line with the government’s announcement, issued guidelines on issuing working capital facility to CMSMEs affected by the coronavirus pandemic, setting interest rate ceiling at 9 per cent.
Of the 9 per cent interest, the government would provide 5 per cent a subsidy and another 4 per cent would be paid by the borrower.
Sunday’s BB circular asked the banks and NBFIs to submit application to the central bank for refinance fund within 10 days of immediate next month of loan disbursement to the businesses specified by the central bank.
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