Bangladesh Bank relaxed regulations governing the operations of offshore banking units (OBUs) to ease the foreign exchange liquidity crunch in the country, facilitate international trade and enable more efficient management of foreign exchange risks. OBUs will now be allowed to directly buy and sell foreign currencies with domestic banks and conduct cross-currency swap transactions.

The central bank disclosed the information in a circular issued on Monday. The directive, issued by Bangladesh Bank’s Foreign Exchange Policy Department, was sent to the managing directors and chief executive officers of all scheduled banks in the country.

Under a circular issued on January 30, 2025, OBUs were not allowed to conduct transactions beyond certain permitted banking services, such as financing businesses in specialised and non-specialised zones, accepting deposits and borrowing from external sources. The new directive has relaxed these restrictions.

The circular said OBUs will be allowed to transact with their own domestic banking units (DBUs) and other scheduled banks. One OBU will also be able to buy and sell foreign currencies and enter into swap agreements with other OBUs and other authorised local banks operating in the country. Bangladesh Bank has provided this facility. Consequently, opportunities to obtain foreign currency financing at competitive costs for authorised trade and business activities will increase further.

Bangladesh Bank said the facility may be used only for the direct needs of customers’ legitimate commercial transactions, funding requirements, settlement of liabilities, liquidity management, asset-liability management and foreign exchange risk management. Banks have been warned against engaging in aggressive or speculative trading solely for profit.

The policy also states that all transactions must be conducted within the framework of international treasury practices, risk management requirements and prescribed limits. OBUs have also been encouraged to adopt cost-effective cross-currency swap and foreign exchange transaction strategies to raise foreign currency funds at lower costs and reduce settlement costs for international trade.