Banks can issue guarantee in both local, foreign currencies

Dhaka,  Sun,  23 July 2017
Published : 21 Mar 2017, 00:08:42
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Banks can issue guarantee in both local, foreign currencies

Banks can issue guarantee in both local, foreign currencies
FE Report


The central bank has relaxed its regulations allowing the commercial banks to issue guarantee for foreign firms in both local and foreign currencies to facilitate their business in Bangladesh.

"We've relaxed the guidelines for foreign-exchange transactions to facilitate foreign firms' business activities in Bangladesh," a senior official of the Bangladesh Bank (BB) told the FE.

He also said the banks are now allowed to issue such guarantee without having to take prior approval from the central bank.

The BB issued Monday a circular to this effect, asking all authorised dealer (AD) banks dealing in foreign exchanges to follow the latest instructions on issuance of guarantee on behalf of non-residents in favour of residents in Bangladesh.

It is observed that for underlying transaction beneficiaries in Bangladesh require guarantee in Bangladesh Taka (BDT) instead of foreign currencies, the central said in its circular.

"To facilitate the transaction, it has now been decided that ADs may issue guarantee, bid bond or performance bond in local currency against taka-equivalent back-to-back foreign-currency guarantee   with   suitable   coverage   for   exchange-rate fluctuation   from   counter-guarantee-issuing banks abroad," the circular noted.

Under the existing regulations, the ADs are allowed to issue guarantee, bid bond or performance bond in foreign currency on behalf of a non-resident firm/company favouring residents in Bangladesh provided a back-to-back guarantee covering the guaranteed amount from an overseas correspondent or other bank abroad is held by them.

The relaxation came a day after allowing foreign investors to invest their funds in local companies through purchasing shares with local currency directly.

"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," the BB said in its clarification issued Sunday.

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