Bangladesh Bank has exempted five defaulting City Group companies from a lending restriction until 31 December 2027, allowing a City Bank-led consortium to provide up to Tk3,000 crore in working capital loans, with Tk1,700 crore agreed in the initial phase.
City Group. Photo: Courtesy
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City Group. Photo: Courtesy
The Bangladesh Bank has granted a special exemption from the Bank Company Act, 1991, to allow banks to provide fresh working capital loans to debt-defaulting City Group, clearing the way for an eight-bank consortium led by City Bank to extend financing to five of the group’s companies.
The central bank’s circular allows the consortium to provide working capital facilities of up to Tk3,000 crore to the five companies, with the exemption from the relevant legal restriction remaining in force until 31 December 2027.
However, the banks have so far agreed to provide Tk1,700 crore in the first phase.
The five companies are City Seed Crushing Industries Ltd, City Sugar Industries Ltd, City Edible Oil Ltd, City Dal Mills Ltd and Shampa Flour Mills Ltd.
Today (4 November), the central bank’s Banking Regulation and Policy Department-2 issued a circular granting the companies an exemption from Section 27Ka(3) of the Bank Company Act, 1991, for syndicated working capital financing led by City Bank PLC.
Under the provision, banks are generally barred from extending fresh credit facilities to borrowers classified as defaulters. However, Bangladesh Bank can grant exemptions subject to specific conditions.
The loan agreement for the initial Tk1,700 crore facility is expected to be signed between the banks and City Group tomorrow (5 November), while disbursement is scheduled to begin from Sunday (8 November), according to bankers involved in the process.
Mashrur Arefin, managing director and CEO of City Bank, told The Business Standard that eight banks had agreed to provide the Tk1,700 crore syndicated working capital loan to the five City Group companies to finance raw material imports ahead of the upcoming Ramadan.
City Bank will provide Tk300 crore of the total facility, while the other seven banks will contribute Tk200 crore each, taking their combined contribution to Tk1,400 crore, he said.
Arefin said the loan agreement would be signed by Thursday, after which funds would be disbursed from Sunday based on the group’s requirements.
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