Bangladesh cuts cash reserve for offshore banks to spur foreign trade

As per the recent announcement, these units are no longer required to maintain any CRR with the central bank, aiming to streamline operations.

Previously, offshore banking units had to maintain a two per cent CRR, but this requirement has now been abolished.

Additionally, banks can transfer unlimited funds from offshore to domestic units, unlike the previous cap of 40 per cent.

This move is expected to boost trade finance and increase the scope of banking activities.

A senior official highlighted that it would attract foreign investment, injecting foreign currency into the economy.

Currently, Bangladesh hosts 34 offshore banking units disbursing significant foreign currency loans.

Moreover, the cabinet recently approved the Offshore Banking Act 2024 draft, aiming to exempt tax on interest earned by depositors. Under this act, no income tax or charges will be imposed on interest or profits earned by offshore banking units.

These units will be allowed to take deposits from 100 per cent foreign-owned companies and provide various foreign trade-related services. Medium and long-term financing facilities must adhere to Bangladesh Bank directives.

Furthermore, banks operating offshore units must obtain a license from the Bangladesh Bank, with operations commencing within six months of licensure.

Special approval from the central bank is required for transfers between domestic and offshore units, and regular inspections of offshore banking unit data will be conducted.

Fibre2Fashion News Desk (DR)