Bangladesh Bank on 19 April 2021 set eligibility requirements for banks to disburse loans from the Taka 5000 million funds aimed at helping start-ups expand and flourish, according to a central bank circular.
As per the prerequisites, all state-owned and private commercial banks or specialized banks can avail the refinancing facility. However, their classified loans cannot be more than 10 percent.
The lenders will also have to maintain regulatory requirements in the form of their cash reserve rate (CRR) and statutory liquidity ratio (SLR) with Bangladesh Bank. Besides, they must have a minimum one-year of banking experience to manage the funds, the central bank said.
On 12 March, Bangladesh Bank decided to form a Taka 500 crore fund to help start-ups smoothly secure financing. Later, on 29 March, Bangladesh Bank declared a circular detailing the fund-formulation mechanisms. As per the guideline, it would be disbursed through a refinance scheme, meaning that banks would first disburse loans among clients and the central bank would later reimburse the fund to banks.
Entrepreneurs aged 21 years and older will be eligible to avail a maximum of Tk one crore from the fund with the highest interest rate set at four percent while banks will get it from the central bank at 0.50 percent interest. The repayment tenure will be a maximum of five years.
Entrepreneurs with innovative ideas will get top priority while their educational qualification, technical expertise, experience, and social acceptance will be considered the same way as collateral would.
Banks will be allowed to keep lower provisioning against the loans compared to that required for regular loans. Currently, 20 percent of a classified loan of the sub-standard category has to be kept as provisioning. But lenders will be allowed to keep 5 percent in provisioning against the start-up loans.
Banks will have to keep 30 percent provision for doubtful loans and 50 percent for bad loans under the start-up fund whereas it is 50 percent and 100 percent respectively for the two types of general loans.
Keeping lower provisions against the start-up fund will encourage banks to disburse loans to new entrepreneurs, the central bank said.