Dhaka: Bangladesh Bank (BB) has permitted individuals and companies to secure taka-dominated loans by using foreign currency deposits held in Offshore Banking Units (OBUs) as collateral. This decision aims to enhance financing activities within the country.
According to Bangladesh Sangbad Sangstha, a circular issued by BB announced that OBUs are now authorized to allow foreign currency deposits of non-resident account-holders to be used by their domestic banking units (DBUs) as collateral. This facility is intended for resident companies, firms, and individuals.
However, certain conditions accompany this new provision. OBUs are required to validate the genuine relationships between account-holders and borrowers in Bangladesh. This includes connections such as non-resident Bangladeshis (NRBs) and their beneficiaries, as well as foreign shareholders/investors and their investee companies.
The use of such collateral is designated for extending short-term working capital loans in the local currency. Notably, there will be no charges or fees associated with the respective collateral. Additionally, DBUs are expected to enforce margin requirements they deem necessary to mitigate exchange rate risk when granting financing to borrowers.