Bangladesh Bank (BB) has reset the criteria for accelerating lending from the Export Development Fund (EDF) to help exporters face recession fallout and maintain competitiveness on global markets.

The new criteria, to be implemented from January 1, also aims at encouraging banks to provide their illegible clients with cheaper loans from this fund.

A circular of the central bank, issued on Tuesday, detailed the new criteria, which includes the interest rate and tenure of the loan, eligible clients and procedures of getting the loan from the EDF.

Established in 1989, the EDF is intended to facilitate financing in foreign currency for input procurements by manufacturer-exporters.

The central bank disburses the fund through authorized dealer banks. The present size of the fund is $300 million.

One of the major features of criteria is the increase of the interest rate, which the central bank considers an encouraging measure for the participating banks to accelerate the loan disbursement process.

The rate of interest against the loan from the fund will be 1.5 percent higher than the present rate as the BB suggested banks to charge their clients the interest, calculating the six-month average rate of LIBOR (London Inter bank Offer Rate) plus 2.5 percent.

Presently, the banks charge LIBOR plus one percent to their clients when the BB charges the banks the interest at six month LIBOR rate.

The banks, however, will have to pay one percent extra on LIBOR from January when they will increase their interest rate for lending from EDF.

"The rate of interest will be lower even after the increase," BB Governor Dr Atitur Rahman told BSS on Wednesday.

Explaining, he said the interest rate would be 3.5 percent with the increase, which is much lower than the present market rate of 12 to 13 percent.

"The cheaper loans from the EDF will help exporters face the impact of recession and maintain competitiveness on global markets," the governor said.

He assured that the central bank would continue its support to the exporters so they can perform better in doing business.

Source: --BSS, Dhaka