Banks required to submit daily foreign currency monitoring reports to BB
The regulator brings operations of banks' offshore
banking units (OBU) under its close watch following a steep rise in demand for
foreign-currency loans, particularly in private sector.
As part of the regulatory move, sources say, the
Bangladesh Bank (BB) has included the OBU operations in a new head of daily
foreign-currency-monitoring report.
The daily-reporting obligation is scheduled to take effect finally from March 21.
A reporting format has already been released in this
connection to collect information on assets and liabilities of OBU operations
along with other relevant data relating to overall foreign-exchange exposure
from scheduled banks, officials say.
Scheduled banks have already been asked to provide
daily exchange position including OBU operations using new rationalized input
template (RIT) on trial basis from February 16, they add.
The BB officials, however, say the daily monitoring
report will help them know about real situation on the country's
foreign-exchange (forex) market.
Besides, the central bank wants to know about
compliance with rules and regulations of OBU operations by the operators
through using the daily monitoring report.
"Actually, we want to know about latest limit of
OBU fund mobilization from domestic sources as well as the size of assets and
liabilities of offshore banking," a BB senior official told the FE.
Earlier on January 31 last calendar year, the central
bank had asked the banks to bring down the limit of OBU fund mobilization from
domestic sources to 30 per cent of their total regulatory capital by December
31, 2021.
Besides, at the close of business on any day, value of
offshore-banking assets in Bangladesh shall not be less than 75 per cent of the
liabilities of offshore banking, according to notification issued by the
central bank on February 25, 2019.
The central bank had brought the offshore-banking operations
in Bangladesh under regulation by issuing the policy in 2019.
In the past, the central bank was not empowered fully
to monitor and supervise the OBU operations closely due to legal constraints.
"We've included the OBU operations in our new
reporting format to monitor the inflow and outflow of foreign currency through
offshore banking properly," another central banker told the FE while
explaining main objective of the latest BB moves towards regulating the forex
market that remains heated of late with exchange rate of the US dollar with the
local currency rising.
Meanwhile, demand for foreign-currency loans through
OBUs of banks has increased gradually despite the capping of lending rate at
maximum 9.0 per cent by the central bank.
"Short-term foreign-currency credits are still
cheaper than local- currency loans mainly due to lower interest rate on such
loans," a senior executive of a leading private commercial bank (PCB) told
the FE Thursday while explaining the uptrend in such loans.
Under the BB's latest policy, the banks are now
allowed to fix the interest rates on buyers/suppliers' credit at six-month
LIBOR (London Inter-bank Offered Rate) plus maximum 3.50 per cent.
Effective interest rate on foreign-currency credit is
now around 4.0 per cent, according to the private banker.
The businessmen are now allowed to avail such credits
to import capital machinery and industrial raw materials.
Meanwhile, outstanding amount of OBU loans that were
provided in terms of foreign currency rose to Tk 801.80 billion as on September
30 last calendar year from Tk 630 billion as on December 31, 2020, according to
the central bank's latest statistics.
The outstanding amount of OBU loans were Tk 730
billion as on June 30, 2021.
Senior bankers, however, say such foreign-currency
loans have increased significantly in recent months following higher import-
payment obligations on the economy.
Bangladesh's import expenses jumped more than 54 per
cent to $38.97 billion in July-December period of the current fiscal year (FY),
2021-22, from $25.23 billion in the same period a year before.
Higher prices of essential commodities, including
petroleum products, on the global market have also pushed up the country's
import payments during the period under review, they explain.
Actually, Bangladesh's foreign trade covering import
and export has increased significantly during the period under review on the
back of gradually reopening economic activities, both domestic and global,
after more than one year of slump mainly due to the Covid-19 pandemic.