BB moves to reopen idle units with Tk 40,000cr fund

Bangladesh Bank is preparing a Tk40,000-crore refinance programme aimed at bringing closed industrial units back into operation, with a focus on boosting production, protecting jobs and strengthening export performance amid ongoing economic headwinds.

Officials said the central bank is drafting a policy proposal to be submitted to the prime minister for approval.

Once cleared, a formal circular will set out the structure and implementation guidelines of the scheme.

The proposed fund will be divided into three segments: Tk20,000 crore for large industries, Tk10,000 crore for cottage, micro, small and medium enterprises (CMSMEs), and Tk10,000 crore for the agriculture sector.

Loans will be offered as short-term working capital with repayment periods ranging from one year to 18 months, enabling firms to restart operations and utilise idle capacity.

A senior official said the facility is intended for firms that were previously operational but became distressed due to shocks such as the post-pandemic slowdown, the Russia-Ukraine conflict, and volatility in the foreign exchange market.

Priority will be given to businesses with confirmed orders and clear market demand.

Policymakers are still considering whether the scheme should be financed directly by the central bank or supported by government resources.

Given tight liquidity in the banking sector, central bank financing appears more likely, though this raises concerns about inflationary pressure from an expanded money supply.

Banks are expected to borrow from the central bank at interest rates of around 5–6 per cent, while lending rates for businesses will be set slightly above inflation but below the policy rate to keep borrowing affordable.

The initiative follows broader government efforts to revitalise industry and safeguard employment.

Bangladesh Bank has identified more than 1,200 closed or partially operational factories through data collected from banks and business organisations.

These have been categorised by loan exposure, including those with outstanding liabilities above and below Tk100 crore.

Eligible firms—particularly those currently classified as defaulters—may be allowed to reschedule existing loans on flexible terms before accessing fresh financing. Officials said only enterprises with credible recovery prospects will be prioritised.

Bangladesh Bank spokesperson Arief Hossain Khan confirmed that discussions are ongoing and that final details will be determined following consultations with the government.

The interim administration has already taken steps to support distressed industrial groups, including providing more than Tk525 crore to Beximco Group to clear worker dues and offering policy support to Nassa Group to reopen back-to-back letters of credit.

Authorities have also allowed export earnings to be prioritised for wages and operational expenses before debt servicing.

Economists have broadly welcomed the initiative while highlighting potential risks.

Fahmida Khatun, Executive Director of the Centre for Policy Dialogue, said the scheme could help revive production and employment, but cautioned that its financing structure must be carefully designed to avoid inflationary pressure.

Mustafizur Rahman, a Distinguished Fellow at the same organisation, stressed the importance of distinguishing between viable and non-viable firms.

He warned against prolonged support for enterprises lacking sustainable business models, while noting that a successful industrial recovery could boost government revenue through higher VAT and tax collection.

Analysts also cautioned that injecting the full Tk40,000 crore through the central bank could significantly increase liquidity through the money multiplier effect, potentially intensifying price pressures and complicating inflation control efforts.

Officials noted that during the pandemic, Tk128,303 crore was disbursed under 23 stimulus programmes, largely financed through monetary expansion, with a portion later becoming non-performing.

To avoid a repeat, the central bank plans to enforce strict monitoring and compliance measures, ensuring that only firms with clean records and no evidence of financial irregularities or capital flight are eligible for support.