Bangladesh Bank has granted general permission for fully foreign-owned industrial enterprises, operating both within and outside specialized economic zones, to borrow directly from their parent companies, associates, or shareholders abroad, in a move aimed at easing access to finance for foreign investors.

The central bank’s Foreign Exchange Investment Department (FEID) issued the directive through FEID Circular on Tuesday, revising earlier provisions under FE Circular No. 34 of September 2, 2025, which governed external borrowing by such enterprises.

Under the new provisions, foreign-owned manufacturing and service enterprises outside specialized zones such as EPZs, PEPZs, EZs and HTPs can now avail short-term borrowing of less than one year without prior Bangladesh Bank approval, provided the funds are used for genuine business purposes.

The circular allows two options for such borrowing. Enterprises may take interest-free loans for general working capital needs, excluding input procurement, with no central bank clearance required even for principal repayment.

Alternatively, they may opt for cost-bearing loans in convertible foreign currencies, including for input procurement, but the all-in cost of such borrowing must not exceed 3 percent per annum.

These loans must be repaid in a single bullet payment at maturity and may be rolled over, provided the total tenor, including rollovers, does not exceed three years from the date of initial drawdown. Such short-term facilities cannot be converted into medium or long-term loans.

Authorized Dealers (ADs) have been directed to report all such transactions to the FEID within one week of execution, in addition to routine reporting requirements.

For fully foreign-owned Type A enterprises within specialized zones, the existing provision allowing short-term foreign currency loans from parent companies or shareholders abroad remains unchanged.

On medium-term borrowing, with tenors of one to five years, the circular sets the ceiling for cost-free loans at USD 50 million or its equivalent, while cost-bearing loans are capped at USD 5 million, with the cost again restricted to a maximum of 3 percent per annum.

Bullet repayment is permitted for loans up to USD 5 million, and borrowers have been given the flexibility to convert outstanding medium-term loans, along with accrued cost, into long-term borrowing at any time by amending or executing fresh agreements.

For long-term borrowing, defined as tenors exceeding five years, the central bank has encouraged cost-free arrangements, while any cost-bearing facility is similarly capped at 3 percent per annum. Bullet repayment is not allowed under this category.

The circular also lays out a set of general conditions applicable to both medium and long-term borrowing. Borrowers must maintain a clean track record with no history of default on external obligations, and the debt-equity ratio for cost-bearing external loans must not exceed 80:20, a restriction that does not apply to cost-free loans.

Authorized Dealers have been instructed to ensure documentation compliance under Annexure-A of Appendix-3 of the 2025 circular before disbursement, and to route all borrowing proceeds through Foreign Currency accounts. General authorization has been given to ADs to maintain such FC accounts for enterprises operating outside specialized zones as well, with funds allowed to accumulate in these accounts for repayment purposes.

The central bank further directed that repayment schedules align with borrowers’ projected cash flows, with repayments drawn only from the borrowers’ FC accounts, and installment amounts capped at USD 5 million or its equivalent. All disbursements, payments and repayments must be routed through the nominated ADs, which are also required to report disbursement details to the FEID within 14 days.

The circular permits outstanding borrowings, including accrued cost, to be converted into equity at any time, subject to compliance with applicable procedures. Any amendment to loan agreements must be reported to Bangladesh Bank within seven days, while ADs have been asked to conduct due diligence in line with anti-money laundering and combating financing of terrorism (AML/CFT) standards, foreign exchange regulations, and tax laws.

Applications falling beyond the scope of this general authorization will need to be forwarded to the appropriate authority for separate approval, the circular said.