Offshore banking units to get more funds from banks’ local operations
The central bank yesterday eased rules allowing banks to transfer more funds from their domestic operations to offshore banking units (OBUs).
As per a central bank's notice issued yesterday, banks would be able to transfer up to 30 per cent of their total regulatory capital to OBUs, up from previous 20 per cent.
An offshore banking unit is a bank's shell branch that conducts regular banking activities but in foreign currency.
The central bank also eased rules on taking foreign currency loans from OBUs by the bank's own subsidiaries not resident in Bangladesh.
A bank's own subsidiary now can avail loans without letter of credit from a licensed bank abroad with acceptable credit rating or foreign exchange brought in from abroad and deposited in a bank in Bangladesh, which are required for the juristic persons not resident in Bangladesh.
A juristic person is an entity, such as a corporation, that is recognised as having legal personality and is capable of enjoying and being subject to legal rights and duties, according to Oxford Reference.
Offshore banking transactions with the juristic persons not resident in Bangladesh shall include nothing other than accepting deposits and borrowings, the BB said.
But with permission from the Foreign Exchange Investment Department of the BB, banks, as part of their offshore banking, may also make loans or advances to the juristic persons not resident in Bangladesh provided that the full amount of loan or advance is covered by requirements.
The central bank on May 27 last year revised its policy to allow local industrial enterprises to take foreign currency loans from OBUs.
Applications for approval of loans from offshore banking to resident industrial enterprises have to be submitted to the foreign exchange investment department, not to the banking regulation and policy department.
For OBUs, banks are required to maintain a minimum 2 per cent cash reserve ratio with the BB on bi-weekly average basis with a provision of minimum 1.5 per cent on a daily basis of the average total demand and time liabilities of OBUs.
This order will be effective from July 1.
With a view to bringing discipline to the offshore banking programme, the BB on February 25 last year issued a full-fledged policy.
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