Bangladesh Bank has allowed importers to hedge commodity prices through commercial banks, enabling businesses to protect themselves against sharp swings in global markets without seeking prior approval from the central bank.
The central bank issued a circular in this regard on Monday, allowing authorised dealer banks to offer commodity price risk hedging facilities to eligible importers. Previously, importers required prior approval from Bangladesh Bank for such transactions.
Once a price is locked in, the importer must buy at the agreed price regardless of whether the commodity’s market price subsequently rises or falls.
The facility will cover industrial raw materials and intermediate goods, fuel, crude and unrefined edible oils, grains, fertilisers, metals and other important commercial commodities.
Only genuine importers will be eligible and the commodities must be purchased through commodity exchanges, according to the guidelines.
Banks can offer hedging for a maximum tenure of one year. Importers will be allowed to hedge up to 100 percent of their actual import exposure, subject to required documentation and risk-management rules.
They can use commodity futures, swaps, commodity index-based forward contracts and other internationally recognised hedging instruments against import liabilities.
A senior Bangladesh Bank official said the move was aimed at helping importers manage risks from commodity price fluctuations.
The facility would allow businesses to protect themselves against abnormal increases in international prices and plan their costs with greater certainty, the official said.
Banks providing the facility will be required to submit periodic reports to Bangladesh Bank.
