Foreign investors can now invest their funds in local companies through purchasing shares with local currency directly, officials said, as the central bank opened a window.
"We've taken the measures through clarifying our existing guidelines for foreign-exchange transactions to facilitate the inflow of foreign direct investment (FDI) into Bangladesh," a senior official of the Bangladesh Bank (BB) told the FE.
He also said it will also help in averting exchange-rate-fluctuation risk during the investment period.
The central bank issued a clarification to this effect Sunday, asking all authorised dealer (AD) banks in foreign exchange to follow the latest instructions on issuance of shares in favour of non-residents by debit to non-resident Taka accounts with overseas branches and correspondents.
"This is to clarify that shares may be issued in favour of non-residents by debit to non-resident Taka accounts maintained by ADs in the names of their overseas branches and correspondents against inward remittance in convertible foreign currencies," says the BB clarification.
It also said the ADs may issue certificate in support of the payment from such account for purchase of shares in Bangladeshi companies.
Talking to the FE, another BB official said the central bank issued the clarification in line with the foreign investors' recommendations.
"The Japan External Trade Organisation (JETRO) had submitted a recommendation to the central bank seeking such clarification," the BB official noted.
The JETRO is a government-related organisation that works to promote mutual trade and investment between Japan and the rest of the world.
In the context of certificate issuance to the beneficiary, the banks will have to follow uniformity for making payment with both currencies, according to the central banker.
The central bank also issued two prescribed formats in this connection.
In the context of certificate issuance to the beneficiary, the ADs shall follow format-A in case of payment from a non-resident Taka account and format-B in case of payment against direct inward remittance in foreign currency.
Under the existing regulations, shares may be issued in favor of non-residents against freely convertible foreign exchanges brought in from abroad through the banking channel.
The ADs are allowed to open and maintain non-resident Taka accounts in the names of their overseas branches and correspondents against inward remittance in convertible foreign currencies. "The fund held in such accounts is tantamount to foreign a currency," it noted.
The gross inflows of FDI increased by 7.08 per cent to $ 1.71 billion during the July-January period of the ongoing fiscal year (FY) 2016-17 from $ 1.60 billion in the corresponding period of the FY 16 while net FDI inflows rose by 8.57 per cent to $975 million from $898 million.
Meanwhile, there have been various suggestions from some policy researchers and business magnets for the government to espouse brave and effective measures for wooing foreign investment on a larger scale, even if it comes from tax-heaven countries or territories.