Pay Import And Service Bills Using Foreign Loan Proceeds
Eligible private-sector industrial enterprises in Bangladesh are now allowed to retain approved foreign loan proceeds in foreign currency (FC) accounts. Bangladesh Bank issued a circular yesterday granting permission to open FC accounts in the borrowers’ names to streamline cross-border payment operations under foreign financing. According to the circular, this opportunity will facilitate the management of foreign currency transactions for paying import bills, service charges, approved local purchases, and loan installment repayments.
Private industrial enterprises can secure medium- and long-term foreign financing subject to approval from relevant authorities. In this context, necessary approvals from the Foreign Loan/Supplier’s Credit Scrutiny Committee of the Investment Bangladesh Authority (IBA), Bangladesh Bank, and the Standing Committee on Non-Concessional Loans will apply as required. Authorised Dealer (AD) banks may open FC accounts in the names of eligible borrowers to retain and utilize approved foreign loans in foreign currency, in accordance with the approval terms and conditions agreed upon with foreign lenders.
Foreign currency held in these FC accounts can be utilized for import payments in compliance with the prevailing Import Policy Order and foreign exchange regulations. The funds may also be used to settle actual service fees for ongoing works under the approved foreign loans. Additionally, foreign currency in these accounts can be converted into Bangladeshi Taka for approved local procurements or purchases. Based on banker-customer relationships and fulfillment of applicable conditions, interest or profit may be earned on the account balances.
The circular also allows enterprises to retain funds necessary for foreign debt servicing. If loan agreements stipulate account retention for installment payments, the FC accounts may remain active for the duration of the loan tenor. However, the balance retained in these accounts cannot exceed the amount required for the next three consecutive installment payments. This initiative by Bangladesh Bank will enhance operational flexibility for private industrial firms in managing approved foreign loans. In particular, it will ease foreign currency liquidity management for settling import bills, service charges, approved local purchases, and debt servicing.
