Bangladesh Bank has issued new guidelines on the use and maintenance of funds received through foreign loans, particularly regarding the opening and operation of foreign currency (FC) accounts against such loans.
The central bank’s Foreign Exchange Policy Department issued a circular on Wednesday, October 7, and sent it to all authorised dealer (AD) banks in the country.
Under the new guidelines, FC accounts opened against approved foreign loans must be operated in accordance with specified rules. Interest or profit may be earned on funds held in these accounts subject to the terms of the banker-customer relationship.
AD banks will have to submit quarterly reports on the utilisation of foreign loan funds to Bangladesh Bank’s Foreign Exchange Investment Department using the prescribed Form LU.
The reports must be submitted at the end of each quarter December, March, June and September.
Bangladesh Bank said the concerned AD bank must close the FC account and notify the Foreign Exchange Investment Department after the foreign loan funds have been withdrawn and utilised. However, if funds need to be retained for repayment of the foreign loan under the terms of the loan agreement, the account may remain operational until the loan is fully repaid.
In such cases, export proceeds other than those related to imports and funds converted into foreign currency from legitimate sources may be credited to the FC account. However, the balance must not exceed the amount required to meet the next three instalments of the loan.
The central bank also instructed that foreign loan proceeds must be used only for the purposes for which they were approved. AD banks must ensure compliance with foreign exchange regulations as well as the terms and conditions of the respective loan agreements.
The new provisions will apply to the opening and operation of FC accounts against approved foreign loans for eligible borrowers under the IBA and SCNC-related arrangements, according to the Bangladesh Bank circular.
The central bank instructed the concerned customers and AD branches of banks to implement the guidelines immediately.
