BRPD Circular Letter No. 31: Policy for Offshore Banking Operation of the Banks

Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. BRPD Circular Letter No. 31 Date: 04 Asharh 1427 18 June 2020 Managing Director / Chief Executive All Scheduled Banks operating in Bangladesh. Dear Sir, Policy for Offshore Banking Operations of the Banks

1. We draw your attention to BRPD Circular No. 02, dated 25 February 2019 and BRPD Circular Letter No. 09, dated 27 May 2019, on the subject cited above.

2. Paragraph 6.2 of the aforementioned Circular No. 02 stipulates that Letters of Credit/Guarantees/Foreign Currency Deposits must be covered by 100% of the value of Medium and Long Term Offshore Banking Loans. Furthermore, under Paragraph 2.3 of the aforementioned Circular Letter No. 09, the policy includes a new Paragraph 6.4.3 directing banks to apply to the Banking Regulation and Policy Department of Bangladesh Bank for prior approval for Medium and Long Term Offshore Banking Loans. Paragraph 8.8 of Circular No. 02 directs that in raising funds for offshore banking operations, a bank may transfer a maximum of 20% of its total regulatory capital from its own onshore operations to offshore operations. Similarly, Paragraph 8.11 of the same Circular directs that for the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), the total demand and time liabilities of offshore banking shall be included in the calculation of the bank's total demand and time liabilities.

3. Now, to increase the opportunity for raising funds for the bank's offshore operations, ensure optimal use of domestic currency funds, enhance the capacity of banks for offshore business through proper fund management, and for the further balanced and integrated development of the offshore banking program, it has been decided to replace the following relevant paragraphs of the Policy for Offshore Banking Operations as follows:

4. Paragraph 6.2 of the Policy shall be replaced as follows: "6.2 Medium and Long Term Offshore Banking Loans Medium and Long Term Offshore Banking Loans shall be granted to such borrowers who are engaged in export-oriented industries or services, or who are engaged in import substitution industries or services, or who are engaged in industries or services producing goods or rendering services for export, or who are engaged in industries or services producing goods or rendering services for import substitution, or who are engaged in industries or services producing goods or rendering services for export, or who are engaged in industries or services producing goods or rendering services for import substitution, or who are engaged in industries or services producing goods or rendering services for export, or who are engaged in industries or services producing goods or rendering services for import substitution. Specifically, loans granted under (a) and (b) above shall be covered by 100% of the value of Medium and Long Term Offshore Banking Loans."

5. Paragraph 6.4.3 of the Policy shall be replaced as follows: "6.4.3 Medium and Long Term Offshore Banking Loans Medium and Long Term Offshore Banking Loans shall be granted to such borrowers who are engaged in export-oriented industries or services. For granting Medium and Long Term Offshore Banking Loans to such borrowers, prior approval of the Banking Regulation and Policy Department of Bangladesh Bank shall be obtained."

6. Paragraph 8.8 of the Policy shall be replaced as follows: "8.8 In raising funds for offshore banking operations, a bank may transfer a maximum of 20% of its total regulatory capital from its own onshore operations to offshore operations. Specifically, for such funds, a maximum of 30% of the total regulatory capital may be transferred from onshore operations."

7. Paragraph 8.11 of the Policy shall be replaced as follows: "8.11 For the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), the total demand and time liabilities of offshore banking shall be included in the calculation of the bank's total demand and time liabilities. For this purpose, the Cash Reserve Ratio (CRR) shall be maintained at a minimum of 2.0% (two percent) of the total demand and time liabilities of offshore banking, and the Statutory Liquidity Ratio (SLR) shall be maintained at a minimum of 1.5% (one and a half percent) of the total demand and time liabilities of offshore banking. For the maintenance of Statutory Liquidity Ratio (SLR) for offshore banking, the bank shall maintain a minimum of 1.5% (one and a half percent) of the total demand and time liabilities of offshore banking in the form of Cash Reserve Ratio (CRR). For the maintenance of CRR and SLR for offshore banking, the bank shall maintain a minimum of 1.5% (one and a half percent) of the total demand and time liabilities of offshore banking in the form of Cash Reserve Ratio (CRR). For the maintenance of CRR and SLR for offshore banking, the bank shall maintain a minimum of 1.5% (one and a half percent) of the total demand and time liabilities of offshore banking in the form of Cash Reserve Ratio (CRR)."

8. The Bangladesh Bank Notification No. BRPD(P-3)/744(27)/2020-4086 dated 18 June 2020 concerning the CRR for Offshore Banking Operations is attached herewith for your information.

9. The directives regarding CRR mentioned in Paragraph 7 above shall come into effect from 01 July 2020. Other directives shall come into effect immediately.

Enclosure: As above. Enclosure: 1 (One) page. Yours faithfully, (Md. Nazrul Islam) Executive Director Phone: 9530252.

Bangladesh Bank Notification Date: 18 June 2020 corresponding to 4 Asharh 1427 No. BRPD(P-3)/744(27)/2020-4086 In exercise of the powers conferred by Section 36(1) of the Bangladesh Bank Order, 1972 (Presidential Order No. 127 of 1972), it is hereby directed that for all Scheduled Banks (including Shariah-based banks) operating in Bangladesh, the amount of cash deposit to be maintained with Bangladesh Bank from their total demand and time liabilities for the purpose of Offshore Banking Operations of the Banks is hereby fixed at a minimum of 2.0% (two percent) on a fortnightly average basis and a minimum of 1.5% (one and a half percent) on a daily basis, as provided in the said Order.

2. This Order shall come into effect from 01 July 2020. (Ahmed Jamal) Deputy Governor