Bangladesh Bank has significantly relaxed foreign borrowing regulations for wholly foreign-owned companies, allowing them to obtain loans directly from their parent companies, affiliates, or shareholders without prior approval in a move aimed at attracting more foreign investment and reducing business costs.

The central bank issued the new directive on Wednesday, simplifying external borrowing rules for manufacturing and service sector companies operating both inside and outside specialized economic zones.

Under the revised policy, wholly foreign-owned firms located in Export Processing Zones (EPZs), private EPZs, Economic Zones, High-Tech Parks, as well as those operating outside these areas, will be eligible to access short-, medium-, and long-term foreign loans subject to specified conditions.

For companies outside specialized zones, the new rules allow interest-free working capital loans from parent companies or shareholders without requiring prior approval from Bangladesh Bank. They may also obtain interest-bearing loans for raw material purchases and business operations at a maximum annual interest rate of 3%.

Such working capital loans must be repaid in a lump sum at maturity, although the repayment period may be extended by up to three years if necessary.

For medium-term financing with maturities ranging from one to five years, foreign-owned firms can borrow up to $50 million in interest-free loans for capital expenditures such as machinery purchases and construction projects. They may also access interest-bearing loans of up to $5 million for similar purposes.

For long-term loans exceeding five years, the maximum interest rate has also been capped at 3%.

The circular further allows companies to convert outstanding foreign loans and accrued interest into ordinary equity shares, providing additional flexibility for foreign investors.

However, interest-bearing external loans cannot exceed 80% of a company’s total capital, while no such limit applies to interest-free loans. All borrowing transactions must be conducted through authorized banks’ foreign currency accounts, and companies with records of loan default will not qualify for the facility.

Bangladesh Bank officials said the policy would enable foreign companies to access financing at substantially lower costs. At a time when global borrowing rates remain elevated, the ability to secure funds from parent companies at interest rates of up to 3% is expected to support higher production, encourage fresh investment, and improve the country’s business environment.