EXHIBIT 4.2

KBC Bank                                               KBC
Hong Kong Branch                                       KBC Bank Hong Kong Branch
                                                       39/F, Central Plaza
                                                       18 Harbour Road, Wanchai
                                                       Hong Kong

20th July 2004                                         Telephone +852 2879 3388
                                                       Telefax +852 2879 3300

Bonso Electronics Limited
Unit 1106-1110,11/F., Star House,
3 Salisbury Road, Tsimshatsui,
Kowloon


Attn:    Ms. Pang Kit Teng Cathy
         Director of Finance

     Dear Sirs,

     Banking Facilities

     KBC Bank N.V. (the "Bank") is pleased to set out below the revised terms
     and conditions upon which the Bank will consider requests made by the
     borrower(s) named in paragraph 1 of this letter (the "Borrower(s)" or each
     "Borrower") for the following facilities (the "Facilities"). The terms set
     out in this letter supersede and replace those set out in any of our
     banking facilities letters previously sent to you.

1.   Borrower(s):
     ------------

     Bonso Electronics Limited

2.   Trade Facilities:
     -----------------

     (a)  Total Facility Amount: HK$25,500,000.00 (Hong Kong Dollars Twenty Five
          Million Five Hundred Thousand Only) maximum but in no circumstances
          that the outstandings of any facility shall exceed the respective
          facility limits set out below.

     (b)  Purpose: For short term trade financing and general working capital
          requirements.

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     (c)  Available for:

          Trade facilities                                      facility limit
          ----------------                                      --------------

          Line 1 with aggregate limit of:                       HK$25,000,000.00

          (i) Commercial Letters of Credit ("L/C's"):
          Issuance of sight and/or up to 120 days usance
          commercial L/C's                                      HK$25,000,000.00

          (ii) Document against Payment ("D/P") and
          Documents against Acceptance ("D/A") Financing:
          Advances (with recourse to the Borrower(s))
          against D/A and/or D/P bills at sight and/or with
          tenors of up to 120 days drawn on parties
          acceptable to the Bank up to HK$4,000,000.00 per
          each drawee.

          (iii) Advances against Trust Receipts: Advances
          against Trust Receipts covering merchandise called
          for under:-

          (a) import L/C's with tenor of up to 120 days,
          which shall include the usance pcriod granted by
          supplier under the respective import L/C's            HK$25,000,000.00

          (b) suppliers' invoices with tenor of up to 120
          days from date of advance with individual limit of
          HKD4,000,000.00                                       HK$25,000,000.00

          (c) incoming D/P or D/A with tenor of up days from
          date of advance                                       HK$25,000,000.00

          (iv) Shipping Guarantees: Issuance of Shipping
          Guarantees supported by Trust Receipts covering
          merchandise called for under import L/C's             HK$25,000,000.00

          (v) Indemnities for Negotiation under L/C's:
          Indemnities for negotiation of documents (with or
          without discrepancies) drawn under export L/C's       HK$25,000,000.00

          (vi) Advances Against Export Invoices: Advances
          with tenors of up to 120 days from bill of lading
          date for up to 100% of the net invoice amount of
          export invoices for customers approved by the Bank
          and with individual limit. of HKD4,000,000.00         HK$25,000,000.00

          (vii) Standby Letters of Credit and Bank
          Guarantees: Issuance of Standby Letter of Credit
          or Bank Guarantees to KBC Bank Germany with tenors
          of up to 365 days to secure a trade facility to
          Korona Haushaltswaren GmbH & Co.; such payment
          undertakings must be in a form and supported by
          agreements or counter-indemnities acceptable to
          the Bank                                              HK$25,000,000.00

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          Line 2 with aggregate limit of:                       HK$500,000.00

          (viii) Overdrafts: Overdraft on HK$ current
          account(s) with the. Bank.                            HK$500,000.00

          Special Conditions/Remarks:
          ---------------------------

               (a) Total limit for facilities (i), (ii),
               (iii), (iv) (v) (vi) and (vii) together under
               Line 1 shall not exceed HK$25,000,000.00

               (b) The maximum tenor of any import facility
               shall not exceed 120 days which shall include
               the usuance period granted by supplier under
               any import L/C's, suppliers' invoices or
               incoming D/A

               (c) Available limit not utilized under Line 2
               can be shifted to Line 1 at the request of
               the Borrower(s)


3.   Foreign Exchange Facility:
     --------------------------

          (a) Same Day Settlement Limit: For foreign
          exchange spot and forward contracts same day
          settlements                                           EUR1,000,000.00

          (b) Notional Amount: For booking of foreign
          exchange spot and forward contracts acceptable to
          the Bank, with maximum tenor of 6 months. The
          notional limit stated in this letter is for
          reference only and is subject to the Bank's
          acceptance of the relevant applications.              EUR2,500,000.00

4.   Application for Facilities:
     ---------------------------

     (a)  No application made by the Borrower to any of the Facilities will be
          considered by the Bank unless the Bank has received all of the
          documents bated in the Schedule hereto each in form and substance
          satisfactory to the Bank.

     (b)  Each application made by the Borrower to use any of the Facilities in
          whole or in part shall be a request by the Borrower to the. Bank to
          extend financing on the terms and conditions set out or referred to in
          this letter. No commitment by the Bank to extend financing shall arise
          under this letter until any application by the Borrower is accepted by
          the Bank either expressly or by its extending Such facilities to the
          Borrower.

     (c)  Such applications shall be made, where applicable, on the Bank's
          standard forms and supported by such documentation that the Bank may
          require.

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     (d)  No application by the Borrower to use any of the Facilities will be
          accepted by the Bank unless unless the Borrower complies with the
          terms and conditions set out or referred to in this letter and such
          other conditions as the Bank may impose from time to time.

     (c)  Acceptance by the Bank in respect of any application made by the
          Borrower is subject to the Bank's overriding right of repayment on
          demand, amending, canceling and/or restructuring any of the
          Facilities. and/or pricing at the Bank's sole, discretion.

5.   Currency:
     ---------

     Borrowings in any currency are subject to availability of finds in that
     currency at the time the borrowings are requested.

6.   Repayment:
     ----------

     (a)  Repayment must he made in full on maturity of each advance or on
          demand whichever occurs first.

     (b)  If there are more than one Borrower named in paragraph 1 of this
          letter, each Borrower shall be jointly and severally liable with the
          other Borrower(s) for the repayment obligation under any of the
          Facilities. Each Borrower further agrees that the Bank is not required
          to make any references to the other Borrower(s) in relation to the
          utilitsation of the Facility by the any Borrower.

7.   Pricing:
     --------

     (a)  L/C issuane fee and commission in lieu of exchange:

          US$50,000 or below       :                1/4%
          Over US$50,000           :                1/32%

     (b)  Interest rates for import and export bills:

          For all HK$ / US$ drawings:
          ---------------------------
          1.5% p.a. over HIBOR / LIBOR

     (c)  Interest rates for Overdraft

          HK$ Prime p.a.

     (d)  Standby Letters of Credit and/or Bank Guarantees issuance fee:

          1% p.a.

     For any drawing unpaid at its maturity date the Bank may, at its sole
     discretion, charge a default interest at maximum of Prime + 6% p.a.

     ("Prime" means the best lending rate determined by the Bank from time to
     time.)

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8.   Security:
     ---------

     An unconditional continuing corporate guarantee executed by Bonso
     Electronics International Inc. (the "Corporate Guarantor") for the
     facilities amount plus accrued interest and recovery expenses.

9.   Arrangement Fee:
     ----------------

     HKD10,000.00 payable up-front which is non-refundable in any event.

10.  Undertakings:
     -------------

     (a)  Submission of the following statemements:

          (i)  No later than 180 days after the end of each fiscal. year, the
               audited financial statements of the Borrrower(s) and the
               Corporate Guarantor(s), if any.

          (ii) No later than 90 days after the end of each half-year, a
               certified copy of the unaudited financial statements of the
               Borrower(s) and the Corporate Guarantor(s), if any.

          (iii) Any other documents as requested by the Bank from time to time.

11.  Others:
     -------

     The Facilities shall be subject to:

     (a)  the terms and conditions of the General Customer Agreement and General
          Agreement for Trade Financing executed and delivered by the
          Borrower(s) to the Bank, and

     (b)  the terms and conditions set out in all other standard agreements or
          documentation executed and delivered by the Borrower(s) to the Bank
          and other banking facilities and services provided by or continued by
          the Bank to the Borrower(s).

12.  Costs and Expenses:
     -------------------

     The Borrower(s) shall, upon demand by the Bank, indemnify the Bank against
     (a) all costs and expenses (including legal fees on a full indemnity basis)
     incurred by the Bank in connection with the negotiation, preparation,
     execution and enforcement of or the preservation of any of its rights
     under, this letter and any other documents referred to herein; and (b) all
     costs, losses or liabilities incurred by the Bank as a result of providing
     any part of the Facilities to the Borrower(s).

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13.  Assignment:
     -----------

     (a)  The Borrower(s) may not assign any of its rights or transfer any of
          its rights and/or obligations under this letter.

     (b)  The Bank may assign any of its rights or transfer any of its rights
          and/or obligation's under this letter.

14.  Governing Law:
     --------------

     This letter is governed by and construed in accordance with the laws of the
     Hong Kong Special Administrative Region.

Please confirm your agreement to the terms and conditions of this letter by
signing and returning to us the enclosed duplicate copy of this letter at your
earliest convenience.

Yours Faithfully,

For and on behalf of
KBC Bank N. V.


/s/_____________________________
Authorised Signatories

We confirm our agreement to the terms and conditions set out above.

For and on behalf of


/s/_______________________________
Bonso Electronics Ltd.
(Borrower)


For and on behalf of


/s/_______________________________
Bonso Electronics International, Inc.
(Corporate Guarantor)


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BONSO ELECTRONICS LIMITED                                   KBC
-------------------------
                                    Schedule

                           List of Required Documents
                           --------------------------


1.   Copies of the following up-to-date documents for the Borrower(s) and the
     Corporate Guarantor(s), if any, certified by its authorized officer:

          o    Certificate of incorporation

          o    Business registration certificate (if available)

          o    Memorandum and articles of association ( or Bye-laws)

          o    Latest annual return filed at the Companies Registry of Hong Kong

          o    Certificate of Good Standing and Certificate of Incumbency for
               Borrower(s)/Corporate Guarantor(s) incorporated outside Hong Kong

2.   Certified extracts of the board resolutions of the Borrower(s) and the
     Corporate Guarantor(s), if any, approving execution, delivery and
     performance of, and the terms of, the agreement and other documents
     required by the Bank evidencing the Facilities and the guarantee(s) (the
     "Facility Documents"), and authorizing named person or persons to sign
     those and any ancillary document.

3.   The duly executed Facility Documents including but limited to the
     following:

          a)   General Customer Agreement by the Borrower(s);
          b)   Letter of Pledge and Master Trust Receipts by the Borrower(s)
               (optional);
          c)   Continuing Guarantee by the Corporate Guarantor(s)
          d)   Foreign Exchange Transactions agreement by the Borrower(s);
          e)   Legal opinion for the Corporate Guarantor(s) by a B.V.I.
               solicitor; acceptable to the Bank;

4.   Duly executed Mandate for Limited Company Accounts, together with signature
     cards by the Borrower(s)

5.   Duly executed Authorization and Indemnity for Facsimile Instructions by the
     Borrower(s) (optional).

6.   Certified true copies of indemnity documents of all authorized signatories
     and two directors for each of the Borrower(s) and the Corporate
     Guarantor(s), if any.

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