Remitters can now deposit in forex – with up to 9% interest

The central bank has taken a new initiative to ease the reserve crisis, permitting remitters to maintain foreign currency deposits, including dollars and pounds, in domestic banks with an interest rate of up to 9%.

Interest payments will also be disbursed in the corresponding currency, as per the central bank.

A Bangladesh Bank circular on Wednesday outlined eligibility for this service, extending it to Bangladeshi expatriates, domestic entities, domestic-foreign joint ventures, and foreign companies.

According to the circular issued by the central bank's Foreign Exchange Policy Department (FEPD), banks can accept these deposits through their offshore units' foreign currency accounts. The interest rate will be established by adding a markup to the reference rate of the respective currency.

For instance, the Secured Overnight Financing Rate (SOFR) will serve as the benchmark rate for dollar deposits, while the Sterling Overnight Index Average (SONIA) will be applied for pound deposits.

Offshore banking units are branches of a bank situated outside its home country, specifically designed to manage transactions conducted in foreign currency. These units make it easier for individuals and businesses to bank internationally and establish offshore accounts.

"This initiative is expected to boost our foreign exchange liquidity as customers will receive more favourable terms compared to other foreign banks when depositing foreign currency in Bangladeshi banks," Md Sarwar Hossain, assistant spokesperson of the central bank, told The Business Standard.

"Another advantage is that depositors can seamlessly remit their deposits and accumulated profits abroad as per their requirements," he added.

However, to open a foreign currency account, remittances must be sent legally from abroad. The foreign currencies remitted to the country will be directly credited to the sender's foreign currency account.

Customers will get interest rates at reference rate +1.50% for three months to one year period, reference rate +2.25% for 1-3 years, and reference rate +3.25% for 3-5 years period.

Considering the current SOFR rate of 5.35% for dollars, a customer depositing for a 3-year period would yield an approximate interest rate of 8.60%.

A senior official of the central bank said the new facility will allow any expatriate Bangladeshi to deposit foreign currency in a foreign currency account opened in their own name or the name of a family member. Upon maturity, the deposited foreign currency, along with accrued interest, can be utilised within the country or repatriated abroad at the account holder's discretion.