Banks asked to enhance collection of deposits from expats in offshore units

The central bank has directed all banks in the country to increase deposit collection of expatriate Bangladeshis in their offshore banking units (OBUs).

The directive came at a meeting between policymaking officials of the Bangladesh Bank, and several private banks, including BRAC Bank, Mutual Trust Bank, City Bank, on Sunday.

The managing director of a private bank, who attended the meeting, told The Business Standard that the amount of cash dollars dropped greatly in the country's banking sector earlier.

However, due to collections through Resident Foreign Currency Deposit (RFCD) accounts, the amount of cash foreign currency deposits in the banks has increased a lot.

The RFCD is an account in foreign currency. Persons ordinarily resident in Bangladesh may open this account with foreign exchange brought in at the time of their return from travel abroad.

Similarly, expatriate Bangladeshis have the opportunity to deposit foreign currency through offshore banking unit (OBU) accounts, said the seasoned banker, adding that the interest rate in this account is very high. "As a result, expatriates will benefit more by depositing dollars in OBU accounts and will not have to pay any tax on the interest."

The Bangladesh Bank permits banks to offer up to SOFR plus 4% to foreign lenders and depositors, encouraging them to deposit their funds in their offshore unit. Considering the current SOFR, banks can offer a maximum interest rate of 9.3% for offshore deposits.

At the meeting yesterday, in a bid to promote collection of deposits through OBU accounts, instructions were given from the central bank to run marketing campaigns in countries where expatriate Bangladeshis are residing.

The managing director of another private bank, who attended the meeting, told TBS that collection of these deposits will help reduce the financial account deficits.

"Our balance of payment (BoP) trade deficit has come down a lot. Besides, we are in surplus in our current account. But we are facing problems over the financial account deficit. This deficit can be reduced by collecting deposits through OBU accounts," he said.

After attending the meeting, Selim RF Hussain, managing director and CEO of BRAC Bank and chairman of the Association of Bankers Bangladesh Ltd, told reporters that they are trying to encourage expatriate Bangladeshis to park foreign currency in RFCD accounts.

He further said in the last 5 to 7 years, this idea has been successful in many countries, including the Philippines and Thailand.

Mentioning that the OBU Act has created the opportunity for foreign currency deposits in the country, he said now the banks need to promote it through various initiatives such as programmes, marketing and training officials.

"Apart from the remitters, the Bangladeshi professionals who are residing abroad will deposit foreign currency in it [RFCD account]. As a result, the flow of foreign currency will increase in the country," he added.