Offshore banking units can now make advance payments against export bills
Currently, 35 banks have offshore units
The Bangladesh Bank has now allowed offshore units of banks too to make advance payments against the purchase of export bills.
In this case, exporters will have to bear costs at a 3.5% rate along with the London Interbank Offered Rate (LIBOR) plus, according to a circular issued by the central bank's Banking Regulation and Policy Department on Monday.
As of 19 February, the LIBOR rate was 0.58%. LIBOR is the rate of interest at which banks offer to lend money to one another in the wholesale money market.
Keep updated, follow The Business Standard's Google news channel
In this way, after selling his export bill to an offshore banking unit, an exporter will be able to receive an advance payment at a 4.08% rate.
According to the circular, a bank – in its offshore banking operation – may discount or purchase accepted usance and deferred export bills against direct and deemed exports of products manufactured in Bangladesh subject to compliance with applicable instructions.
A bank may also extend early payment facilities for exports under open account credit terms, it added.
Open account credit terms is a payment term under, which the buyer promises to pay the seller within a predetermined number of days, and the seller does not restrict the availability of documents that control possession rights to the goods.
An offshore banking unit is a bank's shell branch located in another international financial centre, which conducts regular banking activities but in foreign currency. Currently, 35 banks have offshore units.
The offshore units are mostly active in export processing zones, special economic zones and high-tech parks.
