Dhaka:Bangladesh Bank has issued new directives allowing foreign trading partner banks to open and maintain "Taka Vostro Accounts" without any initial deposit, aiming to expand the use of the local currency in international trade.
According to United News of Bangladesh, this initiative will enable the settlement of import and export trade transactions in Bangladeshi Taka, reducing reliance on foreign currencies. The Foreign Exchange Policy Department-1 of Bangladesh Bank issued a circular on Wednesday, signed by Dr. Md. Abu Bakar Siddique, Director (Current Charge) of the FEPD.
These accounts will allow international commercial transactions to be deposited and settled in Bangladeshi Taka with local banks, lessening the dependence on foreign currency for trade settlements. The circular allows Letters of Credit, contracts, and invoices for imports and exports to be executed in freely convertible foreign currencies, but final settlements must be converted into Taka at the prevailing exchange rate.
Bangladesh Bank has directed local banks to ensure a safe, rapid, and efficient exchange of banking documents and communication with partner banks abroad. Importers must settle transactions through local banking channels or respective Vostro accounts, and overdraft facilities may be granted under specified conditions.
A significant aspect of the new policy is the option to invest surplus funds in these Vostro accounts within Bangladesh. Surplus balances can be invested in Foreign Direct Investment, portfolio investments, alternative investment funds, and open-end mutual funds. With approval, funds can also settle local dues or be remitted abroad.
The central bank emphasized compliance with existing foreign exchange regulations, strictly following rules regarding IMP and EXP forms for transactions. Banks must implement measures to prevent money laundering and terrorism financing, enforcing "Know Your Customer" guidelines.
The directive also addresses trade with countries whose currencies are not freely convertible. With Bangladesh Bank's prior approval, local banks may maintain foreign Nostro accounts to settle trade with such nations, providing a structured framework for non-convertible currency transactions.