Any such financing would need to be informed to the relevant central bank department within a week of its sanctioning
Bangladesh Bank (BB) has extended the deadline for foreign-owned and controlled companies, which are operating in the country, to gain access to domestic finance in local currency against overseas guarantees until the end of this year.
In a circular issued on Wednesday, the central bank's foreign exchange policy department said the decision to extend the deadline was made due to the ongoing Covid-19 pandemic.
However, any such financing would need to be informed to the relevant central bank department within a week of its sanctioning, the circular also said.
Md Serajul Islam, executive director and spokesperson of Bangladesh Bank, told Dhaka Tribune that businesses often need loans to finance their operations.
In light of the pandemic, the decision was made to extend the deadline, which was also something the business community had been requesting for some time now, he added.
In July last year, Bangladesh Bank had relaxed its policy to allow local banks and non-banking financial institutions (NBFIs) to issue credit to the entities in local currency against foreign guarantees.
For issuing credit to such entities, the guarantee that would be provided by the borrowers must be acceptable to the lending banks and NBFIs. No fees can be paid against the guarantee.
In case of lending by NBFIs, the guarantees should be issued by local banks issued against back to back foreign guarantees.
Foreign exchange regulations allow banks and NBFIs to extend loans in local currency to foreign owned or controlled companies.
However, banks and NBFIs need permission from Bangladesh Bank to extend loans to borrowers against overseas guarantees or collateral regardless of ownership or controlling status of borrowing entities.