The Bangladesh Bank (BB) has increased interest rates for US dollars deposited in offshore bank accounts as an initiative to raise stocks of dollars. 

From now on, customers can open accounts in offshore banking and keep foreign currency or dollar deposits. Interest on this deposit will be around 7 to 9 percent.

The Bangladesh Bank's Foreign Exchange Policy Department issued a circular in this regard on Wednesday.

The circular stated that the opportunity to open a deposit account under offshore banking services has been eased. The interest rate has to be determined by adding a markup to the currency-based reference rate.

Around 1.50 percent with a reference rate on deposits of 3 months to 1 year, 2.25 percent with a reference rate for 1 year to 3 years, and 3.25 percent with a reference rate for 3 years to 5 years.

Now the reference rate is 5.5 percent. As a result, 3 months to 1 year offshore banking deposits will get 7 percent interest, 1 year to 3 years 7.75 percent, and 3 years to 5 years 8.75 percent.

Read: Supply of dollars in banks is more than required: BB

Currently, banks offer 5 to 6 percent interest on deposits. The new service of offshore banking will fetch interest on deposits of around 9 percent.

Offshore banking is a separate banking service within a bank. Offshore banking offers opportunities for lending to foreign companies and collecting deposits from foreign sources. Offshore banking accounts in foreign currency instead of local currency. Offshore banking is often treated in a negative way because many people use it to hide their money and avoid paying taxes.