Bangladeshi banks have been allowed to issue Taka-denominated loans against foreign currency deposits held in their Offshore Banking Units (OBUs), according to a circular issued by the central bank, Bangladesh Bank, on Thursday
Under the new directive, banks may use foreign currency funds in OBUs as collateral for local loans to domestic entities and individuals, provided there is a valid relationship between the depositor and borrower, such as an NRB and their local beneficiary, or a foreign shareholder and the company operating in Bangladesh
Non-resident Bangladeshis (NRBs) can also now use their offshore funds as security for borrowing in local currency. This facility, previously unavailable, aims to ease access to credit for NRBs and foreign investors by allowing offshore capital to support domestic financing needs
Until now, OBU deposits were kept entirely separate from the domestic banking system. Banks were prohibited from extending local currency loans secured by OBU-held funds, even if those deposits belonged to NRBs or related foreign entities.
Offshore funds could only be used for offshore transactions, limiting their utility for domestic credit access.
The new circular clarifies that such collateralised loans must be short-term working capital financing, and banks cannot charge fees for using the deposits as security.
However, to manage exchange rate risks, banks may retain a portion of the collateral as margin. In case of default, the pledged foreign currency can be liquidated to recover dues in line with regulatory procedures
The facility has also been extended to include balances held in Private Foreign Currency Accounts (PFCAs) and Non-resident Foreign Currency Deposit (NFCD) accounts
However, balances in International Banking Accounts (IBAs) operated through OBUs remain ineligible under this scheme.
The move has been welcomed by bankers, who say the reform will lower borrowing hurdles and encourage foreign currency mobilisation.
By allowing offshore deposits to support domestic loans, the central bank hopes to boost liquidity and foreign currency inflow.