The Bangladesh Bank has finalised modalities for a Tk 200 crore industrial development fund to be used by the foreign banks to boost term loans for the private sector.

"All foreign commercial banks will provide medium and long term loans to medium and large scale industries in addition to their present level of industrial financing." a BB circular said. "To supplement this additional industrial credit, it has been decided that the Bangladesh Bank will provide refinance to the financing banks."

The foreign banks will dis-

burse loans from their own resources and claim half of the amount disbursed as refinance from the central bank. The . banks will get the money from the BB at Bank rate.

The move to create the special fund was taken in October by Finance Minister SAMS Kibria amidst allegations by the businessmen that they are not getting long-term loans from banks.

As 50 per cent of the total loans will be provided from the special fund, the total amount to be invested under the special scheme will be Tk 400 crore.

"Once this fund takes off in a

good spirit, more money may be channelled through this scheme." a top finance ministry official told The Dally Star yesterday.

The central bank has stressed that loans from the special fund should be given on a priority basis to manufacturing industries in the private sector. Joint venture enterprises including local subsidiaries of international companies will also be eligible for this fund.

The refinancing to the foreign banks will be for a period oftwo to seven years, depending on the tenure of the loan sanctioned to each Individual project.

The modalities say the foreign banks will have to repay the money to the BB in installments which will be fixed for each individual withdrawal of funds.

A grace period will be given to the banks for repayment of the money, but banks will have to pay interests on the loans for the grace period

After the expiry of the grace period, the BB will recover the money on quarterly basis, starting from the date on which the grace period expires.

The banks will have to apply to the central bank with names of the industrial projects against which they need refinancing. and other relevant information

Sources said the World Bank and the Asian Development Bank were also reviewing different measures to provide lontf-tertn industrial .. _

--^Afeeparate company will be set up later to manage a large . kind for. industrial financing. The process of setting up the company is on and negotiations for funds from the International Finance Corporation and ADB will be completed shortly.

As a move to float industrial bonds had flopped because of a fear of deposit withdrawal from banks, the finance minister had sought suggestions from the foreign banks for their greater role in industrial activities.

After a detailed study, the foreign banks submitted a report to the finance minister agreeing to provide industrial loans if they are given a 25 million dollar rediscount facility.