Economy Desk: Bangladesh Bank has completely stopped the transfer of funds from domestic banking to offshore units of the country’s banks.
The central bank issued a notification on Tuesday saying, henceforth, no commercial bank will be able to transfer any dollars or funds from their domestic banking to offshore banking units. At the same time, the funds previously transferred from the bank to the offshore banking unit have been asked to be returned to the parent bank in phases. In this regard, Bangladesh Bank has fixed the time until December 31 of this year.
An offshore unit is a separate unit formed by a bank to collect foreign currency deposits from abroad and distribute foreign currency loans. Almost all the leading private sector banks in the country have offshore units. According to the notification of the central bank, the limit on the transfer of funds from domestic banking to offshore banking in 2019 has been fixed up to a maximum of 20 percent of the total regulatory capital of the bank. It was then revised to 30 percent by issuing a notification in 2020. But the funds transferred from domestic banking to offshore banking by some banks were more than the prescribed limit. Due to this, instructions were given to reduce this fund to 30 percent by 2021.
The notification said, ‘Henceforth, the transfer of funds from domestic banking to offshore banking has been abolished to bring more dynamism to foreign exchange management and to reduce the dependence of the bank’s offshore banking operations on domestic banking. Prior to this, the funds transferred from domestic banking to offshore banking have been gradually reduced, and instructions have been given for full adjustment by December 31, 2024. The concerned officials of Bangladesh Bank said that this instruction has been given due to the intensifying dollar crisis in the country’s banking sector. They say that once the dollar crisis is over, this condition may be relaxed again in the future.
