BB allows foreign cos to issue Taka bond

Dhaka,  Fri,  22 September 2017
Published : 13 Apr 2017, 00:45:40 | Updated : 13 Apr 2017, 09:30:33

BB allows foreign cos to issue Taka bond

Says it is to boost FDI inflow
BB allows foreign cos to issue Taka bond
Siddique Islam
Foreign companies operating in Bangladesh have been allowed to issue Taka bonds for mobilising funds from the local sources as the central bank relaxed further the foreign-exchange transactions regulations.

This is, however, subject to prior permission of Bangladesh Securities and Exchange Commission (BSEC).

Bangladesh Bank (BB) relaxed the guidelines to encourage inflow of foreign direct investment (FDI) into the country, according to a notification BB issued Wednesday.

The foreign companies have been permitted to take long-term loans from the local banks and non-banking financial institutions (NBFIs) to meet their business requirements.

On the other hand, individuals and local companies were eligible to invest in the foreign companies through purchasing their Bangladesh Taka (BDT) bonds.

"General approval is hereby accorded for purchase by individuals and institutions resident in Bangladesh of Taka bonds issued with permission of the BSEC by foreign owned/controlled companies in Bangladesh," reads the notification.

Earlier no person resident in Bangladesh could lend any money or security to any foreign owned/controlled company other than banking company except with the general or specific approval of the central bank.

"We've taken a series of measures to facilitate foreign controlled companies for attracting the FDI into Bangladesh," a BB senior official told the FE.

He said both the individuals and local companies have already been allowed to invest in the commercial papers (CPs), issued by the foreign companies, to widen the  scope of Taka working  capital loans for the overseas business entities.

Earlier on March 23, the central bank had issued a circular in this regard.

The banks have been permitted to invest in the CPs, provide credit enhancements to CP issuers and act as an issuing and paying agents (IPA) of CPs in the existing guidelines.

The IPA means a bank that delivers CPs to the investors against the proof of payment and at maturity repays the investors after receiving funds from the issuer.

Talking to the FE, another BB official said that two new windows have been opened for the foreign companies through relaxations of the regulations to receive loans from local sources.

"It will also help reduce the excess liquidity with the country's banking system," the central banker said, adding that both the individuals and local companies would be benefited through investing their money in the bonds.

On the other hand, foreign investors have been allowed to invest their funds in local companies through purchasing shares directly with local currency. Such relaxation would help the foreign investors avoiding exchange rate fluctuation risk during the investment period, a BB official told the FE earlier.

The gross inflows of FDI increased by 16.91 per cent to $ 2.08 billion during the July-February period of the current fiscal year (FY 2016-17) from $ 1.78 billion in the same period of the FY 2015-16 while net FDI inflow rose by 17.35 per cent to $1.17 billion from $997 million.

Earlier, policy researchers and business leaders had recommended the government for taking effective measures to woo the FDI on a larger scale, even if it comes from tax-haven countries or territories.
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