Bangladesh Bank on Tuesday issued a unified foreign exchange circular consolidating regulations on loans, overdrafts and guarantees in a bid to simplify compliance and facilitate cross-border financial transactions.
The directive, issued under Section 20(3) of the Foreign Exchange Regulation Act, 1947, repeals instructions in the Guidelines for Foreign Exchange Transactions (GFET) 2018 and subsequent circulars, except for monthly reporting requirements in GFET Volume 2. The new rules take immediate effect and will remain valid for one year.
The 27-page circular sets out a consolidated framework for authorized dealers, requiring them to observe international standards, such as the Uniform Rules for Demand Guarantees (URDG), the Uniform Customs and Practice for Documentary Credits (UCP) and International Standby Practices (ISP), when issuing guarantees, standby letters of credit and related commitments.
The directive is organised into three parts. The first covers lending activities, including loans to non-resident bank branches and foreign-controlled firms, as well as provisions for repayment guarantees and foreign borrowing by licensed finance companies.
The second outlines credit facilities for enterprises in export processing and economic zones, detailing conditions for foreign currency and taka loans, bill discounting and medium-to-long-term borrowing. The third sets guidelines for resident entities borrowing abroad, requiring private firms to secure approval from the Bangladesh Investment Development Authority and public sector entities to obtain clearance from the government and Standing Committee on Non-Concessional Loans. It also mandates quarterly reporting of approved foreign loans.
Bankers and industry officials said the consolidation is expected to reduce ambiguity in both funded and non-funded transactions and improve ease of doing business, particularly for foreign-owned companies.