Authority to approve foreign private loans may be delegated to Bangladesh Bank to expedite the processing time, finance ministry sources said.

Regulatory Reforms Commission, headed by retired bureaucrat and former caretaker government adviser Akbar Ali Khan, is actively considering the issue to make the system easier for the businesses that need commercial loans from external sources.

Currently, Board of Investment receives applications seeking foreign loans and a committee, comprising representatives of different government entities, approves those after scrutiny, which often takes a long time, private sector people complained.

The amount of foreign loans received by the country’s private sector per annum now stands at about $50 million, sources in the BOI said. But the demands for foreign loans are high as many corporate entities and export-oriented industries are interested in foreign loans due to low interest rates, they said.

The World Bank in a recent report referred to the complex regulations and lengthy procedures for getting loans from foreign sources and recommended that the approval authority should be delegated to Bangladesh Bank, instead of BoI. It also suggested introduction of minimum loan threshold up to which no approval would be required and also a time-bound system to reduce processing time.

Central bank officials, however, said setting a minimum threshold would be difficult as the issue was closely linked to the country’s foreign exchange reserves and external debt servicing capability.

Regulatory Reforms Commission’s subcommittee on processing and approval of foreign private loans will hold a meeting tomorrow [December 12] at Bangladesh Bank to thoroughly review inflows of and demands for foreign private loans. Central bank governor Salehuddin Ahmed will preside over the meeting, which will also discuss the WB recommendations and ways to make the processing and approval systems easier for the private sector seeking foreign loans, sources said.

According to existing regulations, private industrial enterprises incorporated under the Companies Act 1994 and registered with BOI are eligible for foreign loans. Such corporate borrowers can take money from recognised global funding sources like banks, capital markets, hedge funds and multilateral lending agencies.

The current regulations stipulate that foreign borrowing is allowed only for investments in the areas like import of capital goods for new projects, modernisation or expansion of production units in the industrial sector including small and medium enterprises.

Intending borrowers have to submit more than 20 kinds of papers and documents at the time of applying and wait for unspecified period to get a decision, private sector sources said.

‘The procedures must be simplified as it sometimes takes three to four months for approval,’ Shahjalal Choudhury, an industrialist told New Age on Monday.

Shahjalal, a manufacturer of plastic products hangers for export-oriented apparel industry, wants a time-bound system for a decision on applications.

BoI has no formal desk or separate wing for processing foreign loan applications, said a sources, explaining reasons for the delay.

‘We are seriously contemplating steps to make the entire process easier and hassle-free,’ a member of the reforms commission’s subcommittee told New Age.