Bangladesh Bank yesterday set eligibility requirements for banks to disburse loans from the Tk 500 crore fund aimed at helping start-ups expand and flourish, according to a central bank circular.
As per the prerequisites, all state-owned and private commercial banks or specialised banks can avail the refinancing facility.
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However, their classified loans cannot be more than 10 per cent.
The lenders will also have to maintain regulatory requirements in the form of their cash reserve rate (CRR) and statutory liquidity ratio (SLR) with Bangladesh Bank.
Besides, they must have a minimum one-year of banking experience to manage the funds, the central bank said.
On March 12, Bangladesh Bank decided to form a Tk 500 crore fund to help start-ups smoothly secure financing.
As per the draft guideline, it would be disbursed through a refinance scheme, meaning that banks would first disburse loans among clients and the central bank would later reimburse the fund to banks.
Entrepreneurs aged 21 years and older will be eligible to avail a maximum of Tk one crore from the fund with the highest interest rate set at four per cent while banks will get it from the central bank at 0.50 per cent interest.
The repayment tenure will be a maximum of five years.
Entrepreneurs with innovative ideas will get top priority while their educational qualification, technical expertise, experience and social acceptance will be considered the same way as collateral would.
Banks will be allowed to keep lower provisioning against the loans compared to that required for regular loans.
Currently, 20 per cent of a classified loan of sub-standard category has to be kept as provisioning.
But lenders will be allowed to keep 5 per cent in provisioning against the start-up loans.
Banks will have to keep 30 per cent provision for doubtful loans and 50 per cent for bad loans under the start-up fund whereas it is 50 per cent and 100 per cent respectively for the two types of general loans.
Keeping lower provisions against the start-up fund will encourage banks to disburse loans to new entrepreneurs, the central bank said.