Dhaka:Bangladesh Bank has authorized designated authorized dealer banks to open and maintain foreign currency accounts for eligible private sector industrial borrowers to retain proceeds from approved foreign loans.
According to Bangladesh Sangbad Sangstha, this move by the central bank aims to facilitate cross-border settlement of payments from such loans. The circular specifies that private sector industrial enterprises in Bangladesh can access medium- and long-term external financing, provided they secure prior approval from competent authorities.
Authorized dealer banks are required to obtain and keep copies of approvals from relevant authorities, such as the Scrutiny Committee on Foreign Loan or Supplier's Credit of the Invest Bangladesh Authority, where necessary. For loans sanctioned by Bangladesh Bank or the Standing Committee on Non-Concessional Loan, banks must also retain the corresponding approvals.
Funds in these foreign currency accounts can be used for import payments as per the prevailing Import Policy Order and foreign exchange regulations, as well as for legitimate service payments related to the implementation of the approved projects. Service payments require approval from the competent authority and must undergo due diligence, including applicable tax and VAT deductions.
The circular permits the conversion of foreign currency into Taka for local procurement, contingent on relevant approvals. These accounts may earn interest or profit based on the terms of the banker-customer relationship.
Banks must report the utilization of foreign loan proceeds to Bangladesh Bank's Foreign Exchange Investment Department quarterly. After the loan proceeds are fully drawn and utilized, the foreign currency accounts should be closed, and the department informed.
If loan agreements necessitate retaining funds for loan repayment, these accounts may remain open until maturity. In such cases, they can be credited with export proceeds, net of import payments, and funds converted from Taka from legitimate sources. However, balances for repayment must not exceed the amount needed for the next three installments.
The provisions apply to accounts opened for loans approved by the Invest Bangladesh Authority, Bangladesh Bank, and the SCNCL. The instructions mandate that retained proceeds are used strictly for approved purposes in line with foreign exchange regulations and loan agreements, effective immediately.