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Bangladesh eyes $400 million loan from Indian central bank

May 21, 2012

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Logo of the Reserve Bank of India.—Reuters Photo

DHAKA: Bangladesh is likely to borrow $400 million from the Reserve Bank of India to ease balance of payment problems, the Governor of Bangladesh central bank, Atiur Rahman, said on Monday.

The RBI recently created the $2 billion fund for countries of South Asian Association for Regional Cooperation (SAARC), which includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

“Bangladesh has the scope to take a loan from this fund through the swap arrangement, which was finalized at the SAARC central bank governors’ meeting last week in Nepal,” Rahman told Reuters.

Under the terms of the swap, the borrower will pay interest at two per centage points over the London Interbank Offered Rate (LIBOR) for the first two installments and 50 basis points more for the third and final installment.

Rahman said Bangladesh may use the swap fund mainly at the time of payment to the Asian Clearing Union (ACU) to manage the additional pressure on the external account.

Bangladesh’s balance of payment deficit doubled to $516 million between April and February, from $222 million in the same period of the previous year, according to data from the central bank.