Cenbank extends useful life of capital goods imports

The Bangladesh Bank has extended the useful life of imports of capital goods to three years, which is a significant extension from the one-year limit.

In a circular issued today (December 1), the central bank has directed all listed banks to allow their industrial import customers to benefit from this extended credit period under supplier or buyer credit.

This mechanism applies to imports of capital goods by industrial enterprises located in export processing zones, private export processing zones, economic zones, high-tech parks and other specialized zones designated by the government .

Supplier credit is a financing arrangement where the supplier extends credit to the buyer, allowing them to pay for goods or services at a later date.

In addition, buyer credit is a financing arrangement through which the buyer obtains a loan from a financial institution to finance the purchase of goods or services from a supplier.

The business community says the one-year payment deadline was not feasible for capital goods purchases. The new policy will make investments easier by streamlining the approval process, they say.

The circular said that the Bangladesh Investment Development Authority (Bida) is considering proposals for medium and long-term external borrowing from private sector industrial companies registered with it and the Department of Textiles.

The central bank said approvals for the proposals are given by Bida based on the decisions of its Foreign Loan/Supplier Credit Control Committee chaired by the Bangladesh Bank Governor.

As per the circular, the utilization period cost should not exceed the rate permitted for short-term import financing under supplier/buyer credit. The current interest rate for short-term import financing is SOFR plus 4 percent per annum.