Banks will now be able to provide loans in Taka to companies and individuals operating in the country using foreign currency funds held in offshore banking units (OBUs) as collateral.
Even expatriate Bangladeshis can now also use their OBU foreign currency deposits as collateral for loans.
The central bank's Foreign Exchange Policy Department (FEPD) issued a circular announcing the decision on July 3.
According to the circular: “To facilitate financing activities, it has been decided that OBUs may allow foreign currency deposits of non-resident account holders for use by their domestic banking units (DBUs) as collateral against financing to resident companies/firms and individuals.”
However, the facility comes with certain conditions.
It stated that there had to be a specific request from respective account holders.
The circular also stated that OBUs shall satisfy themselves regarding bona fide relations between account holders and borrowers in Bangladesh, such as non-resident Bangladeshis (NRBs) and their beneficiaries, foreign shareholders/investors and their investee companies, etc.
The collateral shall be used by DBUs for extending short-term working capital loans in local currency.
There will be no charges/fees payable for the respective collateral.
The financing should be granted to borrowers subject to margin requirements considered necessary by DBUs to absorb exchange rate risk.
In case of a loan not being repaid, the deposits shall be liquidated, while OBUs shall transfer the deposits as collateral to DBUs. DBUs shall report the liquidated value as wage remittances in case of NRB deposits used as collateral for respective lending.
For non-NRB deposits, the liquidated value should be reported as equity investment.
However, the encashment may be reported as loan proceeds as per underlying arrangements between borrowers and account holders. In this case, future repayment by borrowers can be credited to deposit accounts maintained with OBUs, subject to approval from Bangladesh Bank.
