Bangladesh Bank (BB) has extended the duration of the relaxed policy, allowing foreign-owned companies to borrow from the local banks without approval from the central bank until December 2021.
Bangladesh Bank first allowed the relaxation in July last year for a period until June 2021 amid the Covid-19 pandemic situation.Usually, a foreign-owned company has to get approval from the central bank before borrowing loans from local banks. The reason is that the foreign companies in Bangladesh make profits by borrowing in local currency and then take profits abroad in foreign currency.
The BB officials said if the companies bring capital in foreign currency, it would increase the flow of foreign currency in the local market.
On the other hand, if any foreign currently loans availed by companies creates a liability that puts pressure on the country’s foreign exchange reserves.
To get loans from local banks under the relaxed rule, the foreign firms only need to bring a bank guarantee from the parent company. Any local bank can lend money to the company by keeping the guarantee letter as security.
A recent directive from the central bank said the opportunity has been extended due to the current coronavirus situation.
Most businesses are in a recession. Various incentives are being given to local companies to meet the financial crisis. But there was no provision in the existing policy for foreign companies.