Bangladesh Bank has issued a new master circular, bringing all rules related to loans, overdrafts, and guarantees under a single framework.

Foreign Exchange Policy Department (FEPD) issued the circular on Tuesday aiming to simplify and consolidate the policies governing foreign exchange transactions.

Bangladesh Bank stated that instructions previously scattered across various guidelines and circulars have been consolidated into this new circular with necessary amendments. This move unifies the provisions for loans, overdrafts, and guarantees into a single structure, which will be effective for one year from the date of its issuance.

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The circular includes provisions for commercial loans, loans against guarantees or collateral provided abroad, various types of guarantees for both domestic and foreign parties, repayment guarantees, and provisions for licensed financial institutions to provide foreign loans.

Banks are instructed to follow internationally recognised rules for guarantees, Standby Letters of Credit (SBLCs), and other payment commitments. They must adhere to international standards such as URDG, UCP, and ISP, provided they are consistent with the country's laws and regulations.

The new circular also clearly outlines loan facilities for institutions in specialised zones, opportunities for borrowing in various foreign and local currencies, usance bill discounting, working capital facilities, and provisions for medium- and long-term foreign loans. It also includes instructions regarding guarantees for foreign loan borrowing and repayment by government, private, and foreign-owned institutions.

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The circular stated that bringing all provisions under one umbrella will make foreign exchange transactions related to loans, overdrafts, and guarantees more streamlined and transparent. This initiative is expected to be particularly helpful for foreign-owned institutions. Bangladesh Bank's move is seen as an important effort to simplify foreign exchange policy and modernise financial transactions in the context of globalisation.