Authorized dealer (AD) banks can retain value-added portion of export proceeds for 30 days instead of 15 days under a further relaxation of rules, for propping up Bangladesh's forex reserves.
The central bank relaxed its regulations again on the encashment of the value-added portion of repatriated export proceeds to help boost export earnings of the country, officials have said.
The latest softening of the regulations on utilization of the funds to settle import liabilities of relevant exporters is aimed at improving the forex situation, according to a notification issued Tuesday by the Bangladesh Bank (BB).
Besides, the funds may be transferable to other ADs, within this prescribed time of 30 days, for settlement of import payments and/or export development fund (EDF) liabilities against admissible bulk imports of relevant exporters, it says.
"We've relaxed our regulations further to help exporters in minimizing their possible exchange loss for settling their import-payment obligations," a senior official of the Bangladesh Bank (BB) told the FE while explaining the main objective of the policy updating.
It will also help the exporters in making their import payment from a bank to other banks, the central banker explained.
As usual, transferable funds need to be unencumbered, the central bank says in the notification.
Before transferring funds, ADs need to satisfy themselves of payment obligations by documentary evidence, the notification reads, adding that ADs transferring the funds will make foreign exchange available to relevant ADs through foreign-currency clearing accounts maintained with the central bank."Such relaxation will help the exporters to ease their cost of doing business," the central banker said while replying to a query.
Earlier on August 03 last, the AD banks were allowed to retain value-added portion of export proceeds in foreign currency for 15 days aiming to bring flexibility in trade transactions.
Value-added portion refers to the export proceeds that are available to exporters after their import bills against back-to-back letters of credit (LCs) have been settled.
The central bank asked the AD banks on May 29 this calendar year to encash value-added portion of repatriated export proceeds by the following business day.
The funds so retained will be used through same banks for settlement of import payments other than back-to-back obligations payable by same exporters within this period, it added.
The BB had earlier issued notification on May 29 on the basis of Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) proposals.
The associations had said in their proposals that all export proceeds should be converted to local currency with the designated exposure-taking AD bank handling, negotiating the export documents and receiving the export proceeds.
"We've given the proposals to the central bank to help manage the ongoing volatility on the country's foreign- exchange market," a senior member of the BAFEDA told the FE without elaborating.
Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon welcomed the latest BB moves, saying that it will help exporters avoid exchange loss for making their import payments by other banks with own funds.
Earlier on Wednesday, the BTMA president at a meeting urged the central bank governor to relax its regulations relating to the encashment of the value-added portion of repatriated export proceeds further to help boost the country's earnings.
Meanwhile, the central bank is providing the US dollar as foreign-currency liquidity support to scheduled banks continuously for managing the forex-market volatility.
As part of the ongoing moves, the central bank sold $70 million more directly to nine banks on Tuesday to help them meet a growing demand for the greenback as global price rises have led to import-cost escalation with its resultant pressures on reserves of Bangladesh, as also of many other countries.
The BB has so far injected $2.63 billion from the reserves directly into commercial banks as liquidity support for import payments in the current fiscal year (FY), 2022-23.
In FY22, the central bank sold $7.62 billion from the reserves to the banks for the same purpose.
Bangladesh's forex reserves remained unchanged at $39.02 billion on Tuesday from the previous level.
The reserves may come down further to more than $37 billion by the end of this week after a routine payment worth $1.73 billion to the Asian Clearing Union (ACU) against imports made during the July-August period of 2022.
siddique.islam@gmail.com