Export Development Fund (EDF) was created in 1988. The Operational Procedure of the Fund was detailed vide BCD CIRCULAR NO. 29 DATED 07.12.1988. Since then a number of circulars were issued amending the said operational procedure. For ease and strict compliance of Authorized Dealer (AD) banks, the operational procedure effecting some changes as to size, interest rate and scope of the Fund is attached hereto.
Please acknowledge receipt and bring the contents of this circular to the notice of all concerned.
The Export Development Fund (EDF) at Bangladesh Bank (BB), its operational procedure:
- The EDF and its objective: Established in 1989, the EDF is intended to facilitate access to financing in foreign exchange for input procurements by manufacturerexporters.
Authorized Dealer (AD) banks can borrow US Dollar funds from the EDF against their foreign currency loans to manufacturer-exporters for input procurements. At their option the ADs can also lend to some extent from their own foreign exchange funds for input procurements (up to fifty percent of NFCD balances, cf., para 20, chapter 13, GFET 2009).
USD 300 million in size as of now, the EDF is held and managed by the Foreign Exchange Reserve and Treasury Management Department (FRTMD) at the head office of BB. Borrowing by ADs from the EDF and repayments thereof are handled through head offices/principal offices of the AD banks concerned.
- Interest rate on borrowings from EDF: On the loan disbursements in USD to AD banks up to 31st December 2009, interest is charged by EDF @ six-month USD LIBOR, with the ADs charging interest @ six-month LIBOR+1 percent from the manufacturerexporter clients borrowing for input imports.
From 1st January 2010 onwards, EDF loan disbursements to ADs in USD will be charged interest @ six-month USD LIBOR+1 percent, with the ADs charging @ sixmonth LIBOR +2.5 percent on their USD loan disbursements to manufacturer-exporters.
- Tenor of EDF loans: EDF loans from BB are repayable by the ADs upon receipt of proceeds of the relative exports (except in case of loans for bulk import of cotton and other textile fibre by BTMA member mills against past export performance); in all cases within 180 days from dates of disbursement, extendable by BB up to 270 days upon application to BB explaining the necessity of longer period for repatriation of export proceeds.
- Eligibility for EDF loans: i) Input imports by manufacturer-exporters against which an AD seeks EDF loan must be in full compliance with the value addition criterion and other requirements of the government’s Import Policy Order (IPO) in force; and of foreign exchange regulations and instructions laid down in the GFET 2009 and subsequent circulars of BB.
- ii) Input imports of a manufacturer-exporter defaulting in repatriation of export proceeds within the statutory period (within 120 days from date of shipment, or such extension as permitted by BB) will not be eligible for financing from the EDF besides other usual regulatory penalties.
iii) The loans to manufacturer-exporters to be eligible for EDF financing must be within the single borrower exposure limit prescribed by BB.
- iv) EDF financing will be admissible for input procurements against back to back import LCs/inland back to back LCs in foreign exchange; by manufacturers producing final output for direct export, and also by producers of local deliveries of intermediate outputs to manufacturers of the final export.
- Amounts of EDF loans: a) For manufacturer exporters other than BTMA mills producing yarn, an EDF loan to an AD shall not exceed i) the limit of input imports permissible against an export LC/firm export contract/inland back to back LC in terms of the value addition requirements prescribed in the IPO in force, or ii) USD 10 million, whichever is lower.
- b) For BTMA mills making bulk import of raw cotton or other fibres against deemed exports (local deliveries of yarn to manufacturer-exporters against inland back to back LCs in foreign exchange), an EDF loan to an AD shall not exceed i) the amount in foreign exchange realized against inland back to back LCs over the past twelve months, or ii) USD 10 million, whichever is lower.
- Procedure of application for EDF loans from BB: Head offices/principal offices of AD banks shall submit to FRTMD, BB duly filled in application in Form-A (at Annexure-I) listing the input procurements financed by them in foreign exchange, against which they are seeking the EDF loans. The application, signed by two appropriately empowered officials will also authorize BB to realize the principal and accrued interest on the EDF loans to the ADs immediately upon expiry of the permissible periods of the loans by debit to the FC clearing accounts of the concerned ADs with BB; unless repaid by them earlier. Repayment advices of the ADs should be accompanied by calculation worksheets in Form-B (Annexure-II). Monthly statements detailing the outstanding USD loans of ADs to customers against which EDF financing have been drawn should be submitted in Form-C (Annexure-III) by head offices/principal offices of the AD banks by the second week of the following month.