Foreign Loans and Parent-Company Loans in Bangladesh: Who Approves, What Rate, What Ratio (2026)

In this guide: Who approves what: the 2026 map · Third-party loans through Invest Bangladesh · Parent-company loans: FEID Circular 03 of 2026 · Trade credit and taka loans · Tax, guarantees and the documents the bank will want · What has changed, and what is still unclear

The short answer

Decide first who the lender is. If it is the parent, an affiliate or a shareholder and the borrower is a fully foreign-owned industrial company, FEID Circular 03 of 2026 lets the loan proceed through the nominated bank without an application: interest-free working capital at will; cost-bearing loans at up to 3% all-in, with bullet repayment and rollovers for up to three years if short-term, up to US$5 million if medium-term for capital expenditure (US$50 million if interest-free), and no bullet repayment if long-term; the debt-equity ratio for cost-bearing loans is 80:20, the money comes into a foreign-currency account, and each instalment is at most US$5 million. If the lender is a bank, supplier or bondholder abroad, apply to Invest Bangladesh with the term sheet, board resolution, feasibility study, CIB report and the company’s papers, pay the scrutiny fee (Invest Bangladesh’s published band runs from Tk 5,000 to Tk 1 lakh by loan size) and wait for the committee; the circular sets no rate cap but the committee tests the rate against a treasury benchmark plus a modest premium, and working-capital loans were not approved under the old practice. If it is trade credit on imports or exports under a year, the bank handles it within the benchmark-plus-3% ceiling. In every case the bank reports, the company withholds tax on the interest, and the loan must fit the ratio the circular applies to that kind of loan, with unconverted share money excluded from equity (see our share money guide). Joint ventures and foreign-controlled companies that are not fully foreign-owned use the Invest Bangladesh route for medium and long-term loans, with the short-term parent facility available to them under the 2025 definition.

Who approves what: the 2026 map

The statutory basis is s.20(3) of the Foreign Exchange Regulation Act 1947, under which Bangladesh Bank issues these circulars, and s.18(2), which restricts residents from lending to non-resident-controlled companies without permission. Two sections often cited in this context are not about loans at all: s.18A was repealed in 2015, and s.18B is the 30-day reporting duty of a foreign company that opens a branch or liaison office. The approval map changed in August 2026 only in name: Bangladesh Bank’s September 2026 circular routes private loans through “Invest Bangladesh Authority (BIDA)”, and whether the Governor-chaired scrutiny committee continues in the same form under the Invest Bangladesh Act 2026 had not been notified when this guide was written.

Third-party loans through Invest Bangladesh

The application file, as the scrutiny procedure has required it: the RJSC certificates, Memorandum and Articles, the Invest Bangladesh registration, the term sheet or loan agreement showing the effective interest rate, fees and repayment schedule, the board resolution, a feasibility study showing the project’s debt-service capacity, the CIB report, the encashment certificates and Form C for the equity already brought in, and for supplier’s credit a BRTC or BUET certificate on the machinery’s price and specification. The fee is Tk 5,000 to Tk 1,00,000 plus VAT by loan size. The committee tests four things: that the loan funds capital expenditure (working-capital loans were not approved under the old practice, and the 2026 circular keeps the focus on term borrowing); that the rate is reasonable, which the Invest Bangladesh notification reproduced at Appendix 3 of the 2026 circular describes as a treasury-bond benchmark plus a modest country-risk premium rather than a number; that the debt-equity ratio is acceptable, where Bangladesh Bank’s published practice has been to regard 70:30 as the usual limit for foreign loans; and that the borrower has no default history. Once authorised, principal and interest are remitted by the nominated bank on the agreement and schedule, after withholding tax, without further reference to Bangladesh Bank, and supplier’s credit repayments also need the bills of entry. The quarterly return in Appendix-4 goes to the Foreign Exchange Investment Department within 15 days of each quarter end. What the actual all-in cost ceiling applied by the committee is in late 2026 is not published; we ask the desk on each file and advise clients to model the loan at the benchmark plus 3% to 4% until told otherwise.

Parent-company loans: FEID Circular 03 of 2026

On 15 July 2026 Bangladesh Bank gave general permission for external borrowing from parent companies, associates and shareholders by fully foreign-owned industrial enterprises, inside or outside the zones, replacing an older rule that allowed parent working-capital loans at up to 3% for six years from the start of operations (still described on the Bangladesh Bank portal, now superseded for these borrowers). Trading businesses are excluded. The permission is structured by tenor:

General conditions: a debt-equity ratio of 80:20 for cost-bearing loans only (the 80 being total debt), no default history on external obligations, proceeds credited to a foreign-currency account with the nominated bank, each repayment instalment not more than US$5 million, and the documentation in Annexure-A of FE Circular 34 of 2025. Reporting is post-facto to the Foreign Exchange Investment Department: within one week for short-term loans, 14 days for medium and long-term disbursements, and 7 days for amendments to the terms. An outstanding loan, with its accrued cost, may be converted into equity at any time, which makes the facility a practical way to fund a subsidiary before deciding how much of the funding should be permanent; the conversion is then a share issue reported within 14 days like any other. Foreign-controlled companies under para 4(1) of the 2025 circular qualify for the short-term facility; for their medium and long-term parent loans, and for all joint ventures, the Invest Bangladesh route applies.

Trade credit and taka loans

Short-term trade finance in foreign currency (buyer’s and supplier’s credit on imports, discounting of usance export bills, early payment against open-account exports) is handled by the bank without Invest Bangladesh or Bangladesh Bank approval, within an all-in cost ceiling that was benchmark plus 4% from February 2024 and is benchmark plus 3% from 11 May 2026 under FEPD-1 Circular 10; the benchmark is SOFR for dollars, Euribor for euros and the equivalent for other currencies. Bangladesh Bank’s published FAQ still says plus 4% and is out of date. Usance periods for raw-material credit were extended to 360 days by a 2025 circular that expired at the end of 2025; check the current period with the bank before structuring a facility around it. Taka term loans from local banks to a foreign-owned or foreign-controlled company that has operated for at least three years are capped by a debt-equity ratio of 60:40, raised from 50:50 by FE Circular 25 of 2 July 2025 and carried into the 2026 consolidated circular; the portal and FAQ still show 50:50. Working-capital taka facilities follow the lending bank’s ordinary rules. In every ratio calculation, share money not converted into shares within 360 days is left out of equity.

Tax, guarantees and the documents the bank will want

Interest paid to a non-resident lender bears withholding tax under the Income Tax Act 2023, at 20% unless a tax treaty reduces it and the lender provides a tax residence certificate with the NBR’s certificate for the treaty rate; the bank remits the net amount and wants the tax challan with the repayment file. Interest on a parent loan is deductible for the borrower within the arm’s-length and thin-capitalisation rules the Act applies to related-party payments, which is a second reason the 3% cap and the 80:20 ratio are workable numbers. A guarantee from the parent to a local bank for a taka facility is permitted; a guarantee by the Bangladeshi company for a foreign affiliate’s borrowing is not, without Bangladesh Bank permission. For the bank’s file on any external loan: the agreement and repayment schedule, the approval (Invest Bangladesh letter, or the self-certification of the FEID Circular 03 conditions), the board resolution, the foreign-currency account into which the proceeds came, the disbursement advices, the Appendix-4 returns filed, the tax challans, and for supplier’s credit the bills of entry. Keep them from the first drawdown; the repayment that stalls is the one where the disbursement five years earlier was never reported.

What has changed, and what is still unclear

Changed in 2025–2026: the move from the Guidelines to annual consolidated circulars (FE Circular 34 of 2025, then FEPD-1 Circular 32 of 2026, valid to September 2027); the general permission for parent loans to fully foreign-owned companies with the 3% all-in cost, the US$5 million and US$50 million medium-term limits and the 80:20 ratio; the trade-finance ceiling cut from plus 4% to plus 3%; the taka term-loan ratio raised from 50:50 to 60:40; and the renaming of BIDA to Invest Bangladesh. Still unclear in October 2026: the actual all-in cost ceiling the scrutiny committee applies to third-party medium and long-term loans, since the circular gives a standard and not a number; whether the Governor-chaired committee continues unchanged under the Invest Bangladesh Act; whether a joint venture or a foreign-controlled company that is not fully foreign-owned can use the FEID Circular 03 medium and long-term terms or stays on the older regime; and the current usance period for raw-material trade credit. We put these questions to Invest Bangladesh and the Foreign Exchange Investment Department on each file, and update this guide as the circulars are re-issued.