A discord between Bangladesh Bank (BB) and the Bank of Tokyo-Mitsubishi (BTMU) over bank-commission payment on the latest ODA loan package may delay the Japanese funding of six more important development projects.
Officials said the ongoing standoff over the commission-payment method could create complications in finalising the new loan deals.
Bangladesh and Japan are in talks over finalising the new loan deals under the 39th ODA (official development assistance)-loan package, also called Yen Loan.
The differences over how to deduct and pay bank commission have arisen after the signing of the 38th ODA-loan package into which six major development projects were incorporated.
The projects are: Hazrat Shahjalal International Airport Expansion Project, Kanchpur, Meghna and Gumti 2nd bridge construction and existing bridges' rehabilitation project, Dhaka Mass Rapid Transit Development Project, Matarbari ultra-supercritical coal-fired power project, Dhaka underground substation project, and small-scale water-resources development.
According to the loan deal the BTMU will act as paying bank of Japan government while BB will work as agent bank of Bangladesh government. According to the traditional banking practice the bank commission of BTMU should be collected from the loan amount as per deducting method since it is an administrative cost.
But the BTMU recently expressed unwillingness to cut the bank commission under deducting method and rather suggested following claiming method and requested BB to collect the commission from projects and then to pay it to the BTMU.
However, the BB found out that providing bank commission under claiming method would create complications and so it wanted to continue with the deducting method.
A senior central bank official said since the BB will have no direct contact with projects, the claiming method will cause long delay in adjusting BTMU's banking commission.
"If claiming method is followed, the BB will have to pay the bank commission to BTMU in the Japanese Yen while the central bank will get the payment from the projects in Bangladesh Taka. Since exchange rate of Yen and Taka always fluctuates, the amount it will get from the project and needs to be paid to the BTMU may vary, causing further complications," he explained.
He also pointed out that the BTMU bank commission is considered international claims. If the commission remains unpaid for long, both internal and external auditors will raise question and the country's image will be damaged for delay in international payment.
The central bank in a letter to the economic relations division (ERD) in October suggested that BTMU's commission could be deducted from a government account with Bangladesh Bank, which would not cause any complication.
However, the issue remained unsettled until now, resulting in complications in the way of finalising deal under the 39th ODA-loan package, according to ERD officials.
The ERD last week in a letter to finance division called for immediately resolving the bank-commission-payment issue in consultation with the central bank for the sake of salvaging the ODA package.
A senior finance division official acknowledged having received the letter from ERD and said they would sit with the BB officials soon to untie the knot.
He said, "Japan is one of the major low-cost-loan providers to Bangladesh. In most cases its ODA-loan charges between zero and 0.70 percent interest with 30-year repayment and 10-year grace periods.