Staff Correspondent: Bangladesh Bank (BB) has raised the cash incentive for export-oriented textile manufacturers using locally sourced raw materials to 5 per cent from the previous 1.5 per cent for the 2026-27 fiscal year, in a move aimed at strengthening the competitiveness of the country's textile and apparel sector.

The central bank's Foreign Exchange Policy Department (FEPD) issued the revised directive through Circular No. 19 on Sunday, amending provisions of an earlier circular issued on July 5.

According to the circular, the enhanced rate will apply under the alternative cash assistance scheme available to eligible exporters.

The decision follows a government directive designed to encourage exporters to source yarn, fabrics and other raw materials from domestic manufacturers rather than relying on bonded warehouse facilities or duty drawback schemes.

Officials said the increased incentive is expected to support local textile producers, promote greater domestic value addition and help exporters remain competitive amid a challenging global economic environment.

Under the revised policy, exporters will be eligible for the 5 per cent incentive if they procure eligible raw materials from local suppliers and meet other requirements set by the authorities.

To qualify, exporters must be members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) or other recognised trade bodies. They will also need to submit documentary evidence confirming the use of locally sourced yarn, fabrics and related materials.

Bangladesh Bank said the revision only changes the incentive rate and does not affect existing procedures for verification and documentation of local raw material sourcing.

Exporters must continue to comply with relevant provisions of existing foreign exchange policy circulars and other applicable regulations, the central bank said.

The revised incentive will apply to eligible export shipments made between July 1, 2026 and June 30, 2027.

The circular has instructed all authorised dealer banks and concerned stakeholders to implement the new incentive structure with immediate effect.

Industry insiders believe the enhanced support could encourage greater backward linkage development in the textile sector, reduce dependence on imported inputs and strengthen Bangladesh's export competitiveness in global markets.