Opportunity to open FC accounts to hold foreign loan funds
Graphics: Agamir Somoy
Bangladesh Bank has allowed eligible private industrial enterprises to open foreign currency (FC) accounts in their names to hold funds from approved medium- and long-term foreign loans in foreign currencies. The central bank issued a circular on Wednesday to facilitate cross border payments under foreign financing.
According to the circular, private industrial enterprises can receive medium- and long-term foreign financing with approval from the relevant authorities. In this case, approval from the Invest Bangladesh (IB) authority’s scrutiny committee on foreign loans or suppliers’ credit, Bangladesh Bank or the Standing Committee on Non-Concessional Loans will apply.
Bangladesh Bank said authorized dealer (AD) banks can open FC accounts in the names of eligible borrowers to hold approved foreign loan funds in foreign currencies and use them according to the loan approval and the terms of agreements signed with foreign lenders.
Foreign currency held in such accounts can be used to make import payments in accordance with the prevailing import policy orders and foreign exchange regulations. The funds can also be used to pay for necessary actual services required for projects or work being implemented under approved foreign loans.
For approved local purchases or procurement, foreign currency in FC accounts can be converted into taka. Interest or profit can also be earned on the balances of such accounts subject to applicable terms under the banker customer relationship.
The facility also allows funds to be kept aside for repayment of foreign loan installments. If the loan agreement contains a provision to reserve funds for installment payments, the FC account can remain open until the maturity of the loan. However, in such cases, the balance cannot exceed the amount required to pay the next three installments.
Stakeholders believe the Bangladesh Bank initiative will provide private industrial enterprises with greater operational flexibility in managing funds from approved foreign financing. In particular, it will make foreign currency liquidity management easier for import and service payments, approved local purchases and scheduled foreign loan installment payments.
