Our dependency on foreign banks will reduce

The facilities that come with OBU fixed deposit accounts are, at an offer level, more or less same for all the banks. These are things like, very lucrative interest rates (up to 8.10% at the moment); availability in many currencies; tax and excise duty-free earning; easy repatriation abroad, etc. 

These are all great, no doubt. But I think one of the core attractions is that the currencies in which people open it are strong ones like USD or Euro, which offset any currency depreciation risk of Bangladeshi Taka. 

Now if we talk specifically about City Bank, our 24-hour OBU help desk and overall digital readiness as reflected in the bank's website, which features OBU FD in its home page and carries a vast FAQ section, are key differentiators from the market. 

Any institution or company from abroad and A-Type companies in Bangladesh are potential customers of these products. They are entitled to get all benefits. By opening International Bank (IB) accounts in our branches located in Bangladesh, which are essentially the same OBU products for locals here, wealthy Bangladeshis who reside abroad but manage business in Bangladesh may now do so much more productively. 

Infographic: TBS

Basically, institutional investors seeking a fixed income vehicle with a good rate of return form a potential segment for OBU. Also, we have received interest from parent companies of multinational corporations based in Bangladesh and our correspondent banking partners. 

Foreign companies willing to invest in Bangladesh can also be a good source. The option to easily transfer funds abroad makes this product attractive to institutional investors.  

To build trust among non-residents, credit rating by international rating agencies is very important. Non-residents may not have an idea about any particular bank in Bangladesh. Credit rating by globally reputed agencies like Moody's or Fitch will come handy in that respect. It will provide clarity to them about the health of a Bangladeshi bank. 

Country credit rating is also important. But our historically poor governance in the banking sector, and overall political uncertainty that is prevalent now (which is eroding the trust of people) are not helping our cause. Lastly, people may perceive some repatriation related uncertainty too under the current Balance of Payment (BoP) conditions. We need to address all of the above. 

The main sources of foreign currency for banks here are export earnings and NRB remittance. With the liberalisation of OBU policy, now this may become another major source, the third source.

The Offshore Banking Act 2024 and the circular of the Bangladesh Bank have enabled banks to offer lucrative rates to offshore customers. I mean, the profit side is protected by the interest rate ceiling. Also, the new law has exempted tax and excise duty on interest. The law has provided customers with the opportunity to freely transfer their funds abroad too. 

Another protection is that the depositors do not need to declare the source of the funds deposited. All of these protections and liberalisations have been enabled through these new regulations.  

Foreign financing is surely cheaper than domestic financing. Therefore, offshore banking operations may play a beneficial role in boosting trade finance of Bangladesh. Customers who have cash flow in foreign exchange want to get the gap financing in foreign currency to optimise their cost. 

On the other hand, domestic trade customers may also be benefited by taking UPAS financing from OBU. 

There is another important macro aspect to it too. The main sources of foreign currency for banks here are export earnings and NRB remittance. With the liberalisation of OBU policy, now this may become another major source, the third source. 

Lastly, if banks can successfully source OBU deposits, our dependency on foreign banks will be reduced and we can then reduce the cost of fee expenses spent on foreign banks.