Bangladesh Opens Offshore Units to Trade Forex with Local Banks

Bangladesh Bank authorized offshore banking units to trade foreign currency directly with domestic banks. This move aims to relieve the acute foreign exchange liquidity shortage in the country. The central bank issued a circular on Monday to implement these changes. The directive targets all scheduled banks and their managing directors. It seeks to facilitate international trade and improve risk management efficiency.

Previously, a January 2025 rule restricted offshore unit transactions to specific services. Those services included financing businesses in special economic zones. The new policy removes these barriers for foreign exchange trading. Offshore units can now buy and sell currencies with their own domestic units. They can also conduct these transactions with other authorized local banks. This expands the available channels for obtaining foreign currency financing.

Regulatory shift lowers trade costs

The new framework allows offshore units to enter swap agreements with local peers. This facilitates cross-currency swaps that were previously restricted. Banks can now raise foreign currency funds at lower costs. Settlement costs for international trade are expected to decrease. The central bank encourages the use of cost-effective strategies. These measures support legitimate commercial transactions and funding requirements.

Daily Bonik Barta reported the central bank’s decision on this regulatory change. The policy emphasizes the use of funds for legitimate business needs. It includes liquidity management and asset-liability management. The central bank warns against aggressive or speculative trading. Banks must adhere to international treasury practices and risk limits. The goal is to ensure stable and efficient foreign exchange operations.

Strict limits prevent speculative trading

The circular restricts the use of this facility to direct customer needs. It covers settlement of liabilities and foreign exchange risk management. Banks are prohibited from engaging in speculative trading solely for profit. All transactions must follow prescribed limits and risk management requirements. The central bank monitors compliance with these international standards. This ensures the stability of the domestic banking system.

The policy directs banks to adopt efficient cross-currency swap strategies. This helps reduce the overall cost of foreign currency acquisition. It also lowers the burden on international trade settlements. The central bank views this as a key step in easing liquidity. The measure supports the broader economic goal of efficient trade finance. Banks must report these transactions within the established regulatory framework.