Banks asked to encash 50% of exporters’ retention quota balances
The Bangladesh Bank has asked the authorised dealer banks to immediately encash 50% of all foreign currency held in relevant exporters' retention quota (ERQ) accounts.
The central bank has also reduced the foreign currency reserve limits for ERQ accounts.
The Foreign Exchange Policy Department of the Bangladesh Bank issued a circular in this regard on Thursday.
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According to the central bank's rules, exporters can retain a portion of repatriated export incomes in ERQ accounts with which they purchase raw materials and make import payments.
Till now, merchandise exporters could retain up to 60% of their repatriated export incomes, depending on their local value addition, which has been reduced to 30% in the new regulation.
The ERQ has been reduced to 7.5% from the previous 15% for naphtha, furnace oil, bitumen, readymade garments made of imported fabrics, electronic goods and more.
The retention limit was reduced to 35% in the IT sector which was 70%.
The revised retention limits will be effective until 31 December 2022, the circular noted.
Regarding the impact of the policy decision of the Bangladesh Bank, former lead economist of the World Bank Dhaka office Zahid Hussain told The Business Standard that it would have marginal impact if the decision of limiting ERQ does not address the foreign exchange rate management. Because intervening arbitrarily is the main problem here, he added.
