Bangladesh Bank on Thursday said foreign-owned companies operating in Bangladesh would be allowed to collect short-term fund from banks, corporate groups and non-bank financial institutions by issuing commercial paper.
The BB issued a circular on the day saying that the foreign-owned companies would be able to collect working capital from local companies, banks and NBFIs.
According to the commercial paper guidelines issued by the BB, commercial paper is a promissory note with a maturity of not less than 30 days and not more than one year that is sold at a fixed rate of interest. To ensure the investors’ interest, commercial paper will be backed by guarantee given by a NBFI or a bank.
A commercial paper is an instrument which is used by a corporate group to take loan from a bank, NBFI or another corporate group while another bank or NBFI has to act as a guarantor in favour of the commercial
paper-issuing financial institution or corporate group.
The commercial paper provides a convenient financing method because it allows issuers to avoid difficulties and expenses of getting business loans.
Issuance of commercial paper will help to develop and broaden the money market and will widen the option for investments.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Miscellany