Banks’ offshore units can finance machinery imports by specialised-zone firms without BB approval
A specialised zone (SZ) refers to an economic zone, export processing zone, private export processing zone, Hi-Tech Park and others
From now on, offshore banking units (OBUs) can finance capital machinery imports for up to three years under buyer's credit for fully foreign-owned businesses in the country's Specialised Zones (SZs) without prior central bank approval.
Buyer's credit is a loan provided to foreign businesses to facilitate their purchases of goods or services from a seller in another country.
According to a Bangladesh Bank circular issued yesterday, OBUs are also permitted to borrow funds from their Domestic Banking Units (DBUs) up to 30% of their regulatory capital, or the limit prescribed by the central bank from time to time.
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OBUs that already have borrowings exceeding 30% must adjust within three months from the issuance of this circular.
This facility was granted so that companies in the newly established specialised economic zones can import capital machinery easily.
According to the Offshore Banking Act, 2024, A "specialised zone" shall refer to an Economic Zone, Export Processing Zone, Private Export Processing Zone, Hi-Tech Park or any other zone declared by the government from time to time.
According to the circular, the central bank also permitted OBUs to borrow funds from their Domestic Banking Units (DBUs) up to 30% of their regulatory capital, or the limit prescribed by Bangladesh Bank from time to time.
OBUs that already have borrowings exceeding 30% must adjust within three months from the issuance of this circular.
A central bank official told TBS that banks were instructed to reduce the regulatory capital invested in their OBUs from DBUs by December 2024. However, as many banks have been unable to meet the 30% limit, the central bank has granted approval on a case-by-case basis.
The official added that under the new circular, banks now have three months to reduce their OBU investment to 30%.
Offshore banking activities shall be carried out through OBUs of scheduled banks operating in Bangladesh. Any scheduled commercial bank willing to operate an offshore banking business in Bangladesh shall have to obtain a license for OBU from the Bangladesh Bank.
Offshore Banking Units (OBUs) in Bangladesh offer a range of services, including trade finance for both specialised and non-specialised zones, financing for capital machinery imports, international banking accounts, deposit acceptance, and other related facilities.
