In a major move to bolster the leather sector, Bangladesh Bank has relaxed loan conditions for raw hide traders ahead of Eid-ul-Azha, allowing them to access new financing without first clearing previous arrears.

The central bank issued a circular on Tuesday (May 5), aiming to ensure a steady flow of liquidity into the market before the festival, which provides the bulk of the raw materials for the country's export-oriented leather industry.

According to the new directive, the requirement for hide traders with rescheduled loans to pay a specific portion of their outstanding dues before receiving fresh credit has been temporarily waived.

The central bank noted that the leather industry is "a significant export sector in Bangladesh" and is heavily reliant on the peak supply of hides collected during this period. The circular emphasized that ensuring traders have sufficient cash reserves is essential for the "smooth collection, preservation, and subsequent trade of hides."

Under the new guidelines, banks have been directed to sanction and disburse necessary working capital loans not only to large-scale tannery owners but also to grassroots collectors operating in villages and cattle markets.

This suspension of mandatory upfront payments for borrowers with rescheduled loans will remain in effect until June 30, 2026, enabling a wider range of traders to secure funds despite unresolved dues.

Furthermore, Bangladesh Bank has instructed commercial banks to set specific lending targets for the leather sector for the 2026 fiscal year.

These targets must not be lower than the previous year's allocation, and banks are required to submit their target figures and implementation reports by July 31.

Sector stakeholders expect this initiative to significantly ease liquidity shortages, allowing for more aggressive raw hide purchases and helping to ensure "a fair price for sacrificial animal skins at the producer and middleman levels."