Written by The Banking Post
On July 03, 2025, Bangladesh Bank issued a notification for lending by banks against collateral of funds held in offshore banking units (OBUs). To facilitate financing activities, it has been decided that OBUs may allow foreign currency deposits of non-resident account-holders for use by their domestic banking units as collateral against financing to resident companies/firms and individuals, the notification read.
In accordance with regulations, OBUs can take deposits in foreign currency from non-resident Bangladeshi nationals, persons of Bangladeshi origin, foreign nationals and enterprises, companies/firms registered and operating abroad, foreign institutional investors, etc.
From now on, the fund can be used as collateral by banks for leanding to resident companies and persons. In this case, banks will satisfy themselves regarding the bonafide relations between account-holders and borrowers in Bangladesh, such as non-resident Bangladeshis (NRBs) and their beneficiaries, foreign shareholders/investors and their investee companies, etc. NRBs can also avail loans by keeping their foreign currency deposits as collateral, as per the notification.
The collateral shall be used for extending short term working capital loan in local currency. There will be no charges/fees against such collateral, the circular noted. The notification allowed banks to maintain margin if necessary to absorb exchange rate risk.
In the event of respective loan not being repaid, banks will liquidate the foreign currency colletaral subject to observance of some formalities, the notification said.
In addition to foreign currency deposits of OBUs, balances held in private foreign currency accounts and non-resident foreign currency deposit accounts can be used as collateral for Taka lending. But, balances held in international banking (IB) accounts maintained with OBUs cannot be used as collateral for lending, the circular quoted.
Foreign owned companies hailed the decision of the central bank as a milestone. It is not easy to arrange collateral locally for foreign owned companies to borrow from banking system. The new policy will support these companies to avail Taka loan against collateral of foreign currency deposits maintained in Bangladesh by their shareholders/parent companies. This will encourage foreign investments in Bangladesh, they quoted.
