Banks’ offshore operations to receive a boost

Bangladesh Bank (BB) today relieved offshore banking units of banks from maintaining cash reserve ratio (CRR) in order to encourage increased foreign currency deposits and improve flow of forex.

Prior to the relaxation, banks were required to keep 2 percent CRR--a portion of the customers' deposits that banks have to maintain with the central bank--for offshore banking operations (OBO), according to a BB official.

In its circular issued to banks, the BB said it relaxed the regulatory requirement to facilitate offshore banking operations.

"We have eased the rule so that banks can attract more foreign currency deposits in their offshore banking units. This will improve their forex liquidity," said Md Sarwar Hossain, director of the foreign exchange policy department at the BB.

The move comes as the country has been facing forex dearth and subsequent depreciation of the taka for the last two and a half years as inflows from remittance, exports, loans and investment continue to fall behind outflows for payments, including import bills.

The BB also allowed banks' OBOs to place funds to their domestic banking units to settle the import payment of capital machinery, industrial raw materials, imports by the government and other permissible payment obligations.

A head of treasury of a private bank said banks' loanable fund will increase following waiver from CRR for OBOs. "Simultaneously, our borrowing cost will decline," he added.

"This will also give a leeway to banks to offer higher interests to attract foreign currency deposits," he added.