‘Country rating matters in offshore banking’

Offshore Banking was introduced in Bangladesh by Bangladesh Bank on December 17, 1985 through a circular. Since then, offshore banking has been in Bangladesh as a business unit of a bank and initially only Type A industrial entity of Export Processing Zone were permitted to do full business banking with offshore Banking Unit (OBU). OBUs were permitted to mobilise deposit and borrowing only from non-residents abroad. With the passage of time, OBUs were permitted to discount Import and Export bill and provide term lending to resident business entities. Offshore Banking was not open for general people. Now resident Bangladeshis and corporate entities including Type-A, Type-B and Type-C industrial enterprises operating in EPZs/EZs/HTPs having bonafide relations with non-residents are permitted to maintain International Banking Account or IB Account in offshore banking. This broadening of the operational freedom of offshore banking would definitely increase the foreign currency inflow of the country. Many Bangladeshis has formal earning in foreign currency which they now can easily keep in IB accounts, earn attractive interest/profit tax free and do legitimate cross-border transactions. We believe, this incentive in IB Account would encourage non-resident Bangladeshis to bring and keep their foreign currency earning in offshore banking.

Offshore Banking Act, 2024 definitely guarantees the advantages offshore banking to clients in other countries. Earlier, offshore banking services were regulated via circulars and instructions of central bank. Now, it is regulated by the act passed in parliament. This strengthens and protects the interest of clients. Moreover, the act waived all kinds of direct and indirect taxes and duties levied on depositors and foreign lenders of offshore banking.

Protection of privacy of the client is one of the core principles of banking. Clients of Midland Bank offshore banking will get the same privacy protection that our regular clients get. Bangladesh is a member state of AsiaPacific Group on Money Laundering (APG) which is an FATF styled organisation and committed to ensure the adoption, implementation and enforcement of internationally accepted anti-money laundering and counter-terrorist financing standards as set out in the FATF Forty Recommendations. Moreover, as per Offshore Banking Act, 2024 we have to report our activities to the central bank. Therefore, within the framework of internationally accepted principles and local law, clients' privacy is protected.

Country rating definitely has an important role in attracting investors and depositors from abroad. Therefore, recent downgrading of country rating by international agencies is surely a blow for us. However, regular lender and investors to Bangladesh are aware that Bangladesh has good track record as a borrower. Since our liberation, neither in public sector nor in private sector, a single default of repaying external borrowing happened. As pricing of borrowing and lending in international level is purely risk based, we have to pay more now to borrow or attract deposits from the international market. Offered interest/profit rate in offshore banking in Bangladesh is one of the highest in the region which we think would help us to overcome the setback due to the downgraded international rating.

In Midland Bank offshore banking, foreign nationals, foreign companies/firms registered and operating abroad and foreign institutional investors, can open and maintain FC accounts in USD and EURO currency. Midland Bank also launched a deposit product named International Banking Account or IB Account that resident Bangladeshis and corporate entities including Type-A, Type-B and Type-C industrial enterprises operating in EPZs/EZs/HTPs can open and maintain to do bonafide transactions with non-residents in USD and EURO currency. We are currently offering Fixed Deposits ranging from 3 months to 5 years with interest rate up to 8.30% in such accounts and in the prevailing market dynamics, it is an attractive offer. All the income in the accounts in offshore banking unit is totally tax free and can be repatriated anytime. Our liability marketing team is working to attract clients from home and abroad and so far we are getting good response.

Flexibility in movement of fund is there in offshore banking accounts in Bangladesh. However, as of now ATM transactions in these accounts are not permitted. But view only internet banking access is available. As our central bank has taken initiative to build a cashless society, banks also enhanced their technological capacity. Transactions through ATMs and net banking or smartphone apps from offshore banking accounts would be available like regular banking very soon.