Bangladesh Bank expands trade finance scope for offshore banking units

The Bangladesh Bank has amended key provisions of its directive governing offshore banking units (OBUs), in a move to broaden access to trade finance.

The central bank issued a circular today (11 November), modifying the OBU guidelines originally issued on 30 January, to allow greater flexibility in extending trade finance facilities through Authorised Dealer (AD) banks.

Under the earlier framework, OBUs were permitted to provide trade finance to enterprises located in specialised and non-specialised zones, arranged through their own bank's ADs, in the form of buyer's credit, accepted bill financing, and similar instruments.

The latest amendment, however, significantly widens this scope.

According to the revised provisions, OBUs can now extend trade loans not only through ADs of their own bank but also via ADs of other banks, subject to comprehensive risk assessment — including counterparty exposure and limit evaluation.

This represents a major step toward enhanced interbank collaboration in offshore financing operations.

For enterprises located in specialised zones, OBUs are now allowed to finance entities other than fully foreign-owned ones arranged through both their own ADs and those of other banks in the form of admissible trade finance instruments for the permissible tenure. Such financing must comply with existing prudential credit norms and due diligence requirements.

Likewise, for enterprises located in non-specialised zones, OBUs can now extend buyers' credit, accept bill financing, and other permissible trade instruments through both their own ADs and those of other banks, following proper risk evaluation procedures.

The central bank's latest initiative is viewed as part of its continued efforts to deepen and diversify Bangladesh's trade finance ecosystem.

By allowing OBUs to work with ADs across different banks, the policy seeks to ensure more efficient utilisation of offshore liquidity, minimise transaction bottlenecks, and promote a more competitive financial landscape.

Industry insiders have welcomed the move, noting that the expanded framework will enable local exporters and importers to access a wider range of foreign currency financing options, particularly at a time when global trade and liquidity conditions remain dynamic.