Policy framed for offshore banking

• Banks to maintain statutory liquidity ratio and cash reserve ratio before lending

• Banks have to invest 75pc of outstanding amount locally

Scheduled banks in Bangladesh will have to invest at least 75 percent of the outstanding amount of the offshore financing in the country, according to a policy introduced by the central bank yesterday.

The policy is part of the Bangladesh Bank’s efforts to bring credit discipline in the banking sector.

Foreign entities with presence in Bangladesh and abroad are eligible to borrow foreign currency loans from the offshore banking units (OBUs). Besides, local enterprises located at economic zones, export processing zones, private export processing zones, and hi-tech parks can take loans from the units.

Some 35 banks, both local and foreign, now run offshore banking operation in Bangladesh and disbursed loans amounting to Tk 58,273 crore as of June last year.

As per the new policy, OBUs will have to mobilise major funds from external sources and will not be allowed to collect more than 20 percent of their regulatory capital from domestic banking operation.

The OBUs will not be able to accept any deposit or loan which is repayable on demand by cheque, draft or pay order.

Banks will have to maintain statutory liquidity ratio and cash reserve ratio before lending, according to the policy.

In 1985, the government had issued an order allowing the offshore banking service, but there were lots of loopholes in the system, which gave scope to vested quarters to resort to wrongdoing.

The central bank has found that vested quarters laundered money through the OBUs, a BB official said.

Besides, local companies often take foreign currency loans from the OBUs, which does not go with the core spirit of the service, he said. As per the new policy, banks will have to take approval from the central bank to open every OBU and have their licences renewed.

The OBUs will not be allowed to collect any deposit from Bangladeshi nationals, except expatriate Bangladeshis. Banks will not be allowed to channel remittance using the OBUs, according to the policy.