BB allows FC accounts for private firms receiving approved foreign loans
Bangladesh Bank (BB) has allowed authorised dealer (AD) banks to open and maintain foreign currency (FC) accounts in the names of eligible private sector industrial borrowers to retain proceeds from approved foreign loans.
The central bank issued the instruction on Wednesday to facilitate cross-border settlement of payments from approved foreign loans.
Under the new provision, private sector industrial enterprises in Bangladesh can obtain medium- and long-term external financing subject to prior approval from the competent authorities.
AD banks must obtain and retain copies of the relevant approval for each foreign loan, including approval from the Scrutiny Committee on Foreign Loan or Supplier’s Credit of the Invest Bangladesh Authority, where applicable.
For loans approved by Bangladesh Bank or the Standing Committee on Non-Concessional Loan (SCNCL), banks must also retain copies of the relevant approvals.
Funds retained in the FC accounts may be used to make import payments in accordance with the prevailing Import Policy Order and foreign exchange regulations. They may also be used for bona fide service payments required to implement projects for which the loans were approved.
For service payments, banks must obtain approval from the competent authority where required and conduct necessary due diligence, including deducting and depositing applicable taxes and VAT.
The circular also allows foreign currency held in the accounts to be encashed into taka for local procurement, subject to the conditions of the relevant loan approvals.
The FC accounts may earn interest or profit in accordance with the terms and conditions governing the banker-customer relationship.
AD banks must report the utilisation of foreign loan proceeds to the Foreign Exchange Investment Department (FEID) of Bangladesh Bank on a quarterly basis for the quarters ending in December, March, June and September.
Once the loan proceeds have been fully drawn down and utilised, the FC accounts must be closed and the FEID informed accordingly.
However, if a loan agreement requires funds to be retained for repayment, the FC accounts may remain open until the loan matures. In such cases, the accounts may be credited with export proceeds, net of import payments, as well as funds generated through the conversion of taka from legitimate local sources.
The amount retained for repayment purposes cannot exceed the amount required to meet the next three instalments.
The new provisions will apply to FC accounts opened and operated against foreign loans approved for eligible borrowers by the Invest Bangladesh Authority, Bangladesh Bank or the SCNCL, as applicable.
Bangladesh Bank instructed AD banks to ensure that funds retained in the accounts are used only for the purposes for which the loans were approved and in accordance with prevailing foreign exchange regulations, approval conditions and loan agreements.
The instructions take effect immediately.