Government and institution measures in response to COVID-19.
Government and institution measures in response to COVID-19.
31 March: Government announces details of its BDT 50bn (approx. USD595m) stimulus package for export-oriented industries. This includes assistance towards salaries and funding of 2 year loans to factory owners at 2% interest.
5 April: Prime minister announces another stimulus packages of BDT 677.5bn (approx. USD8bn) planned to implement in immediate, short and long phases through four programs (increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply).
13 April: Prime minister announces: direct cash assistance of BDT 7.6bn (approx. USD91mn) for informal sector workers; health insurance of BDT 5-10 lakh for health workers (doctors, nurses and others) and bankers in case of COVID-19 infected and BDT 25-50 lakh in case of death, total fund allocated BDT7.5bn (approx. USD89mn); special honorarium BDT 1bn (approx. USD12mn) allocated for bankers, health workers and others.
Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.
Banks permitted to extend LC usance (payment) periods for import of raw materials, agricultural implements and chemical fertilizers (from 180 days to 360 days) and of life saving drugs (from 90 days to 180 days).
23 March – Reduction in Repo interest rate:
BB’s Repo interest rate reduced from 6% to 5.75%. The repo rate is further reduced to 5.25% effective from 12 April.
22 March – Buy-back of government securities:
BB announces to buy back government securities from secondary market. As some banks and financial institutions act as primary dealer of such securities, this will help ease their liquidity.
20 March – Promotion of payment services:
1 April - Reduction in liquidity ratio requirements for banks:
Required Cash Reserve Requirement (CRR) of the banks reduced from 5.5% to 5% on bi-weekly average basis and 5% to 4% on a daily basis. CRR is further reduced to 4% on bi-weekly average basis and 3.5% on daily basis effective from 15 April.
3 April – The World approved $100m:
The World Bank approved a fast-track $100 million financing to help Bangladesh prevent, detect, and respond to the COVID-19 (Coronavirus) pandemic and strengthen its national systems for public health emergencies.
12 April - ADR (Advance Deposit Rate) / IDR (Investment Deposit Rate):
ADR rate increased to maximum 87% from 85% and IDR for Islamic banking has increased to 92% from existing 90%.
12 April - Quarterly repayment for imports under supplier’s/buyer’s credit:
Bangladesh Bank has decided that bullet repayment will be permissible (earlier permissible only for import of raw materials upto USD 0.5m with usance period between 6 months to 1 year) for other usance imports under supplier’s/buyer’s credit, usance period can be below 6 months or above 1 year.
13 April – Refinance scheme BDT 50bn (approx. USD 595m) for agriculture sector:
The scheme will be financed from BB's own source. The affected customers will be able to avail up to 20% extra of the existing loan facilities under the scheme. BB will charge interest 1% from banks and banks will charge 4% from customers. The loan will be repayable within 18 months including 6 months grace period.
20 April - Refinance Scheme of BDT 30bn (approx. USD 357m) for low income professionals, farmers, micro businessmen:
The scheme will be financed from BB's own sources. Loan limit to individual customer is BDT 75k to BDT 3m. BB will charge 1% interest to banks, banks will charge 3.5% interest to Micro Credit Financing Institutions (MCFIs) and MCFIs will charge 9% interest to customer. Customers will repay loan within 1 to 2 years including grace period.
27 April - Providing agricultural loan at 4% to the crop sector:
BB instructed banks to provide loan at 4% interest from banks’ own funds. BB will charge provide banks 5% interest as subsidy.
3 May – Loan from abroad for foreign owned/controlled companies:
BB is permitting foreign owned/controlled companies operating in Bangladesh to take short term working capital loans, for the tenure of one year extendable to another one year, from their parent companies/shareholders for funding payments of 3-month salaries. The facility is not applicable for those companies availing loan from BDT 50bn stimulus package.
11 May 2020 – BB restricted on dividend payment by banks:
Banks with capital adequacy ratio (CAR) (in relation to their risk-weighted assets (RWA)) of 12.50% or above will be permitted to declare up to 30% dividend (of which cash dividend may be up to 15%); banks with CAR between 11.25% and 12.50% may declare dividend up to 15% (of which maximum cash dividend may be 7.5%); banks with CAR below 11.25% may declare dividend up to 10% (of which maximum cash dividend may be 5%). Cash dividend can be distributed before September 30 in favor of individual (local and foreign) investors.
12 May - Remittance incentives:
Expatriate Bangladeshis can get 2% incentives without showing any paper on remittance upto $5,000 (earlier $1,500) and for more than $5,000 papers need to submit within 2 months (earlier 15 days).
13 May - 360-day special repo:
Banks and financial institutions can borrow 360 days against additional treasury bills and bonds of statutory deposit rate (SLR) with Bangladesh Bank. The remaining amount of the face value will be paid as repo by applying margin of 15% and 5% face value of treasury bills and bonds respectively. Rate would be decided at auction. The borrowed money cannot be invested in govt securities and BB bills.
10 June – Waiver of interest on loans:
BB instructed banks to waive customers interest for the period from 1 April to 31 May based unclassified loan outstanding balance as at 30 March 2020. According to the instruction, loan balance upto BDT 0.1m, waiver the whole amount of interest; loan balance more than BDT 0.1m to BDT 1m interest, interest waiver @2% annually; loan balance more than BDT 1m; interest waiver @1%. Customer wise maximum amount of waiver is BDT 1.2m.
11 June – LC issue with realization clause:
BB permitted that input procurements under back to back/usance LCs may be issued with realization clause on behalf of exporters operating outside EPZ/EZ till 31 December 2020.
Stimulus packages of BDT 677.5bn (approx. USD 8bn)
Package 1: Government to provide BDT 300bn fund for banks to provide working capital loan facilities to the affected industries. These loans will carry interest at rate of 9%, half to be borne by borrower and half by Government as a subsidy. BB has published a circular detailing about eligibility, application, management and other terms of the package on 12 April. On 23 April BB has established Revolving Refinance Scheme of BDT 150bn to ensure financing by banks. Banks can borrow 50% of loan disbursed from BB at 4% interest rate.
Package 2: Government to provide BDT 200bn fund for banks to provide working capital loan facilities to Small (cottage industries) and medium enterprises. These loans will carry interest at rate of 9%, of which 4% to be borne by borrower and 5% by Government as a subsidy. BB has published a circular detailing about eligibility, application, conditions, reporting and other terms of the package on 13 April. On 26 April BB has established Revolving Refinance Scheme of BDT 100bn to ensure financing by banks. Banks can borrow 50% of loan disbursed from BB at 4% interest rate.
Package 3: Under Back-to-Back LC arrangement, the Export Development Fund will be increased from USD 3.5bn to USD 5bn for facilitating further import of raw materials. Interest rate will be 2%. BB has issued a circular on 7 April to implement the package.
Package 4: Central bank to launch BDT 50bn pre-shipment credit refinance scheme. BB has issued a circular detailing application method, payment method, reporting and other conditions of the package. It will be financed from BB's own source. BB will charge interest 3% from banks and banks will charge 6% from customers.
21 July - Access to finance from domestic sources against overseas guarantees:
GFET, Vol-1 restricts lending against overseas guarantees or collateral outside Bangladesh regardless of ownership/controlling status of borrowing entities. Given the ongoing situation due to covid-19 pandemic, it has been decided that banks/NBFIs may extend admissible Taka finance against overseas guarantees (preferable bank guarantee/standby letters of credit) to resident companies irrespective of ownership/controlling status; subject to adherence to all applicable credit norms and prudential parameters, and observance of the conditions provided in the circular
Ministry of Labour has prohibited garments and other factories from laying off workers ahead of the Eid-ul-Fitr festivities. Furthermore, such factories are mandated to pay a full month’s salary to workers who have worked full or part of the month in April. Workers who have not been able to work at all during April shall be entitled to receive 65% of the month’s pay.
14 May - Disbursement of cash aid:
Prime Minister launched the disbursement of BDT 12.5bn (approx. USD 142m) cash aid for 5 million poor families. Each family will get BDT 2,500 (USD 30) cash through mobile financial services (MFSs).
Banks may, without repayment guarantee, advance credit up to USD 500k for import of coronavirus related life-saving drugs, medical kits/equipment and other essential medical items.
4 April - Maximum margin limit for import child food:
Bangladesh Bank has set the margin limit to 5% for opening LC for importation of food for children.
23 March – Relaxations for holding meetings and regulatory reporting:
Bangladesh Securities and Exchange Commission (BSEC) relaxes requirement to hold annual and extraordinary general meetings and board meetings, publication and dissemination of price sensitive information and monthly/quarterly submissions to the Commission. Companies may use any digital means for holding meetings. BB issues similar instructions on holding virtual meetings and relaxing regulatory reporting.
07 April - UK govt pledges £21mn for Bangladesh:
The UK has announced 21 million pounds (approx. BDT2.2bn) in funds to support Bangladesh to contain the spread of coronavirus, including the Rohingya camps in Cox's Bazar.
05 April - SAARC Development Fund (SDF) assistance:
SAARC Development Fund (SDF) has allocated a total fund of USD 5m for the SDF-COVID 19 Emergency Project(s) for all the 08 SAARC Member States subject to certain eligibility criteria.
Section 108A of the Income Tax Ordinance 1984 provides that income tax returns filed by employees are due the next business day after the end of “general holidays,” and considering Bangladesh is currently in a “general holidays” situation because of the pandemic (absent any instructions from the NBR), it would appear these provisions would apply.
ADB’s assistances for Bangladesh:
Asian Development Bank (ADB) has provided a USD 600m loan as financial assistances to fight to pandemic. It has also provided a USD 0.35m emergency grant and a USD 1.3m one-off cash support facility.
6 June – Divide country in red, yellow and green zones:
The government has divided different parts of the country into three zones – red (full lockdown), yellow (limited lockdown) and green (open).
29 May - IMF approved $732m:
The International Monetary Fund (IMF) approved US$ 732 million emergency assistance for Bangladesh under the Rapid Credit Facility and the Rapid Financing Instrument.
Main sources of information
Tax: Ashraf Ali - email@example.com