Bangladesh Bank has introduced a new lending facility, allowing domestic individuals and institutions to secure Taka-denominated loans using foreign currency funds held in Offshore Banking Units (OBUs) as collateral.
The central bank issued a circular detailing this directive on Thursday.
Under the new policy, non-resident account holders can now leverage their foreign currency deposits in OBUs as collateral to obtain loans from the domestic units of banks within Bangladesh. Similarly, Bangladeshi expatriates will also be able to use their foreign currency held in OBUs as security for Taka loans in the country.
According to the Bangladesh Bank notification, a "reasonable relationship" must exist between the borrower and the account holder. Valid relationships include those between expatriate Bangladeshis and their local beneficiaries, foreign shareholders, foreign investors, or foreign-owned companies.
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However, this collateral can only be used for short-term working capital loans, and banks are prohibited from charging any fees or charges for the collateral itself.
The directive also stipulates that in cases of loan default, banks will have the opportunity to formalize the process and liquidate the collateral to adjust the outstanding loan amount.