Forex borrowing thru offshore banking to continue

It will help domestic banking units settle import payments

| Updated: January 05, 2023 17:39:37

Forex borrowing thru offshore banking to continue

Placement of funds from offshore banking operations (OBOs) with domestic banking units will continue to facilitate import payment, at this hour of foreign-exchange crisis worldwide.

The central bank Wednesday extended time for fund transfer from OBOs to facilitate settlement of import payments for capital machinery, industrial raw materials and imports by the government.

The facility will remain valid till June 30, 2023, according to a circular issued by foreign- exchange investment department of the Bangladesh Bank and signed by its director Husne Ara Shikha.

This relaxation will help mitigate the ongoing dollar crisis to some extent, a central bank official told the FE, seeking anonymity.

This will help in collecting dollar and mitigate dollar shortages. OBOs operate their activity under the central bank guidelines and they usually take deposits and lend through foreign currencies.

Earlier, Bangladesh Bank had extended the facility up to December 31, 2022.

But such placement of funds into domestic banking units will not exceed 25 per cent of a bank's regulatory capital.

However, a number of bankers feel such facilities usually would not help much on-shore banking.

Md. Shaheen Iqbal, Deputy Managing Director of BRAC Bank, told the FE that this would help raise the flexibility of banking operations.

"On-shore banks will be able to borrow from off-shore branches to meet demand for import purposes," Mr. Iqbal said.

Off-shore banks can borrow from foreign sources to meet their demand for foreign currencies.

Importers and entrepreneurs in Bangladesh are the main clients of such off-shore banking and they usually prefer such branches for the availability of foreign currencies.

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