Banks race to rescue City Group

Banks Race to Rescue City Group With Tk4,000 Crore Support Plan

Thebangladaily.com – Banks race to rescue City Group as 36 local and foreign banks and financial institutions consider a new working-capital package of around Tk4,000 crore. The proposed support is aimed at keeping the conglomerate’s imports, production and sales running while protecting more than Tk26,600 crore already lent to the group.

The lenders face growing urgency because Bangladesh Bank’s temporary relief from loan classification is set to end after September. They must complete a restructuring, rescheduling or another acceptable resolution arrangement by the end of the current month.

Keeping the business cycle active

City Group needs funds to import raw materials, continue manufacturing and maintain sales. Any disruption to these activities could reduce cash generation and make it harder for the company to meet its obligations, increasing pressure on both the group and its lenders.

The banks are expected to meet senior Bangladesh Bank officials this week to discuss their proposed framework. City Bank Managing Director and Association of Bankers, Bangladesh chairman Mashrur Arefin said the purpose is to help City Group import commodities, maintain production and sustain sales.

“The banks want to provide working capital so City Group can import commodities, continue production and maintain sales.”

New financing versus existing debt

A central question in the banks race to rescue City Group is how a new working-capital facility would be treated if the group’s existing loans become classified after September. A newly approved facility is separate from existing borrowing and would not automatically become classified solely because older loans change status.

However, the new credit would still depend on City Group’s future financial performance, the structure of the facility, its use and the terms of any Bangladesh Bank-approved resolution. If the group cannot repay the fresh borrowing, the facility could also come under classification pressure.

Rescheduling existing debt and providing working capital serve different purposes. Rescheduling changes the repayment terms of old obligations, while working capital is intended to finance raw materials, production and sales-related activities that keep a business operating.

Regulatory conditions and cash-flow oversight

Bangladesh Bank rules allow support for distressed or classified borrowers when conditions are met, but restrictions may apply. Instructions issued in May 2026 state that a borrower using a special exit facility cannot take another new credit facility from the same bank until the exit loan is fully repaid, except for facilities that already existed.

That condition makes the structure of the proposed package especially important. Lenders must assess City Group’s repayment ability, cash generation and financial condition, while ensuring that fresh funds support operations rather than being used to cover older debt.

An escrow and cash-flow monitoring arrangement is also being considered. Under such a system, sales proceeds would be deposited into a central escrow account, allowing lenders to monitor cash flows and determine how funds are used and repaid.

Frequently Asked Questions

Why are banks considering fresh funds for City Group?

The proposed working capital is intended to help the group import commodities, continue production and maintain sales, which could support its ability to generate cash and repay obligations.

What is at risk if no resolution is reached?

If an acceptable restructuring, rescheduling or resolution plan is not completed, City Group’s existing loans could face classification after September, creating further pressure on the company and its lenders.

What is the purpose of an escrow account in this plan?

An escrow account could allow lenders to monitor sales proceeds and oversee the use of cash generated by City Group’s operations.