Bangladesh Bank has proposed the government give a 3 percent subsidy on export-loan interests so that garment makers affected by ongoing political unrest could make up for their losses.

Currently, export loans carry a 7 percent interest rate but banks are not much interested in it, as it does not match the cost of funds.

So, the central bank has said the banks should be allowed to charge 10 percent interest on export loans: the exporters will pay 7 percent and the government will subsidise 3 percent.

The proposal was made yesterday at a meeting chaired by Finance Minister AMA Muhith, as a follow-up to the demand made by garment exporters on December 11.

Muhith said the government would make a decision after calculating the costs to be created by the proposal if accepted.

The garment owners also demanded that all existing term loans and forced loans in textiles, garments and backward linkage industries be given a grace period of two years and transferred without any interest to a block account.

In addition, they demanded relaxing the loan classification policy so that the loans become classified after being overdue for six months instead of three months now.

Bangladesh Bank said the policy would not be changed but it will allow banks to send proposals to the central bank case by case.

The meeting decided to give an incentive package to the affected garment industries by reducing taxes and increasing the existing facilities.

Muhith held the meeting with officials of BB, finance division, banking division and four state-owned commercial banks.