PRACTICE NOTES
Foreign Borrowing by
Bangladeshi Banks & FIs
A complete side-by-side reference of features, applicable Acts, Rules, Bangladesh Bank guidelines and circulars, approval pathways, prudential conditions, and tax treatment applicable to scheduled banks, financing companies, leasing companies, and credit companies borrowing from overseas financial institutions.
LegalSeba LLP
Foreign
Borrowing
Borrowing
SHORT-TERM VS LONG-TERM
Two regimes,
one currency flow.
Whether you are dealing with foreign loans by the banks, a foreign loan by the financing company, external credit lines for a leasing company, or a foreign loan by the credit company in Bangladesh, the regulatory burden depends almost entirely on tenure and end-use. Short-term borrowings (original maturity of one year or less) — typically trade-finance lines, nostro placements and OBU-to-OBU placements — operate under a streamlined, largely post-facto framework administered by the Foreign Exchange Policy Department (FEPD) of Bangladesh Bank under delegated authority to Authorised Dealers. Long-term borrowings (maturity exceeding one year) — usually balance-sheet term funding, syndicated facilities, refinancing lines, multilateral development-finance funding, or capital-machinery on-lending — trigger the full external commercial borrowing regime, including review and approval by the Scrutiny Committee headed by the Governor of Bangladesh Bank, and where the end-use is industrial, processing through the Bangladesh Investment Development Authority (BIDA) Online Single Service portal.
Across both regimes, the transaction is layered with statutory obligations from at least eighteen Acts, multiple Rules, the master Guidelines for Foreign Exchange Transactions (GFET), and a body of more than thirty active circulars from FEPD, BRPD, FEID, DOS, DMD and BFIU. The matrix below maps every commercial parameter that differs between the two regimes, then enumerates each applicable instrument with its citation and the reason it bears on the transaction.
As a leading law firm in Bangladesh, LegalSeba LLP actively assists foreign lenders, local banks, and non-bank financial institutions (NBFIs) in navigating this complex regulatory matrix. Our banking and finance team ensures seamless execution, from term-sheet drafting and structuring to securing BIDA/Bangladesh Bank approvals and issuing clean legal opinions.
Short-Term Foreign Borrowing
Foreign-currency funding with original maturity not exceeding 12 months — buyer's/supplier's credit, accepted-bill financing, OBU trade-finance lines, nostro overdrafts, ACU clearing facilities, repo placements, and short-term loans from correspondent banks.
Long-Term Foreign Borrowing
Foreign-currency funding with maturity exceeding 12 months — bilateral and syndicated term loans, multilateral DFI lines (IFC, ADB, FMO, DEG, OPIC), export-credit-agency facilities, foreign-currency bond issuances, subordinated debt, and refinancing of existing external obligations.
Authorised Dealer (AD)
A scheduled bank licensed by Bangladesh Bank under section 3 of the Foreign Exchange Regulation Act, 1947 to deal in foreign exchange. The borrowing bank itself routes the transaction through its own AD/OBU function.
Offshore Banking Unit (OBU)
A specially licensed business unit of a scheduled bank — defined under the Offshore Banking Act, 2024 — through which most cross-border foreign-currency borrowing and on-lending is booked, with statutory tax exemptions on qualifying interest income/outflows.
02 · FEATURE MATRIX
Side-by-side comparison
Every commercial, structural, prudential and procedural parameter that materially differs between short-term and long-term external borrowing by a scheduled bank — from tenure and pricing through to documentation and reporting.
Parameter
Short-Term Borrowing≤ 12 months · Trade & Liquidity
Long-Term Borrowing> 12 months · Term & Project Finance
Definition & Typical Instruments
Foreign-currency credit lines with original maturity of up to 12 months. Includes buyer's credit, supplier's credit, accepted bill financing, deferred payment LCs, nostro overdrafts, ACU clearing lines, money-market placements, OBU-to-OBU placements within Bangladesh, repo and reverse-repo lines with foreign correspondents, and short-tenor confirming-bank facilities.
Foreign-currency loans with maturity exceeding 12 months. Includes bilateral term loans, syndicated facilities, club deals, multilateral DFI loans (IFC, ADB, FMO, DEG, OPIC, OPEC Fund, World Bank, CDC), export-credit-agency facilities, foreign-currency bond/note issuances abroad, subordinated debt qualifying for Tier-2 capital, and structured project-finance facilities.
Typical Tenure
30 – 360 days
Most trade-finance lines run 90–180 days and are rolled over at maturity. Usance terms for industrial enterprises have been extended in some cases up to 3 years under specialised provisions in FE Circular No. 24 dated 24 October 2024.
Most trade-finance lines run 90–180 days and are rolled over at maturity. Usance terms for industrial enterprises have been extended in some cases up to 3 years under specialised provisions in FE Circular No. 24 dated 24 October 2024.
3 – 10 years
Project and term loans typically run 3–10 years; LTFF-style refinancing facilities permit up to 10-year maturity inclusive of a grace period not exceeding 12 months. Bond issuances may run longer subject to specific BB approval.
Project and term loans typically run 3–10 years; LTFF-style refinancing facilities permit up to 10-year maturity inclusive of a grace period not exceeding 12 months. Bond issuances may run longer subject to specific BB approval.
Permitted Lenders
International correspondent banks (Citi, JP Morgan, Standard Chartered, HSBC, Mashreq, ICBC, MUFG, Sumitomo, etc.); foreign OBUs of multinational banks; ACU member-bank lines under the ACU mechanism; multilateral trade-finance programs (IFC GTFP, ADB TFP, AfDB ATFP); confirming and discounting banks abroad. Bangladeshi banks collectively access USD 3–4 billion annually through these channels.
International commercial banks; international capital markets (bond investors); multilateral financial institutions including IFC, World Bank, ADB, CDC, DEG, FMO, OPIC and the OPEC Fund; export credit agencies (Euler Hermes, SACE, EXIM Bank of China, JBIC, US EXIM, Sinosure); equipment suppliers offering supplier's credit; sovereign wealth funds where applicable; and foreign equity holders only by way of short-term bridging arrangements (sparingly approved).
Prior Bangladesh Bank Approval
GENERALLY NOT REQUIRED
The borrowing operates under general permission contained in the GFET-2018 and successive FEPD circulars. The AD/OBU may book the transaction directly subject to compliance with the all-in-cost ceiling, eligible-currency rules, KYC/AML diligence and reporting. Only post-facto reporting to FEPD and the Statistics Department is mandatory in most cases.
The borrowing operates under general permission contained in the GFET-2018 and successive FEPD circulars. The AD/OBU may book the transaction directly subject to compliance with the all-in-cost ceiling, eligible-currency rules, KYC/AML diligence and reporting. Only post-facto reporting to FEPD and the Statistics Department is mandatory in most cases.
REQUIRED — SCRUTINY COMMITTEE
Application must be approved by the Scrutiny Committee chaired by the Governor of Bangladesh Bank. Where the end-use is industrial, the application is filed through BIDA's Online Single Service (OSS) platform at bidaquickserv.org and forwarded to the Scrutiny Committee. The committee evaluates commercial viability, indebtedness, creditworthiness, repayment period, debt-equity ratio, and the quality, price and economic life of any procured capital machinery.
Application must be approved by the Scrutiny Committee chaired by the Governor of Bangladesh Bank. Where the end-use is industrial, the application is filed through BIDA's Online Single Service (OSS) platform at bidaquickserv.org and forwarded to the Scrutiny Committee. The committee evaluates commercial viability, indebtedness, creditworthiness, repayment period, debt-equity ratio, and the quality, price and economic life of any procured capital machinery.
Interest-Rate Ceiling
(All-in-Cost)
(All-in-Cost)
Capped at SOFR + 4.00% p.a. (and equivalent benchmark + spread for EUR/GBP/JPY/CNY) under the prevailing FEPD circular regime. The ceiling moved from SOFR+3.00% (Sep 2022) → SOFR+3.50% (Sep 2022) → SOFR+4.00% (Feb 2024).
- Includes margin, commitment fee, syndication fee, front-end fee, project appraisal fee, legal fee
- Excludes pre-payment fees and BDT-denominated fees
- Currency-equivalent benchmarks: EURIBOR for EUR, SONIA for GBP, TONA for JPY, LPR for CNY
Must be reasonable vs international market rates for the tenure and currency. The benchmark guidance is the prevailing government treasury bond rate in that currency for that tenure, plus a moderate country-risk premium.
- Excessive risk-premium margins attract heightened Scrutiny Committee review
- BB-LTFF (Long-Term Financing Facility) refinancing window has historically been priced 180-day SOFR + 0.25%–1.25% to PFIs
- All-in-cost ceiling for offshore lending under OBU is capped at SOFR + 3.50% p.a. for import/export bill discounting
Permitted Currencies
The five convertible currencies declared by Bangladesh Bank under Article 18 of the Bangladesh Bank Order, 1972 and recognised under the Offshore Banking Act, 2024: USDGBPEURJPYCNY
Same five-currency basket. Deal-specific approval may be granted by FEPD for additional currencies in exceptional cases (e.g. Indian Rupee for cross-border trade with India under specific bilateral arrangements).
Booking Entity
Predominantly through the Offshore Banking Unit (OBU) of the scheduled bank under FE Circular No. 11 dated 30 January 2025. OBU booking carries statutory tax exemption on interest paid to overseas lenders and exempts the unit from CRR/SLR maintenance under earlier provisions, although the position has tightened progressively. Some short-term lines may flow through the Domestic Banking Unit (DBU) with FEPD permission.
Either OBU (where qualifying end-use exists) or the scheduled bank's main balance sheet under specific FEPD authorisation. The choice of booking entity determines tax treatment, capital adequacy impact, and asset-classification rules. Bond issuances are typically booked at the head-office level rather than the OBU.
End-Use Restrictions
- On-lending to Type-A, B, and C enterprises in EPZ / Economic Zones / Hi-Tech Parks
- Discounting of import and export bills (admissible under FE Circular 31 dated 31 July 2025)
- OBU-to-OBU placements within Bangladesh
- Working-capital lines to foreign-owned/controlled firms in line with GFET Chapter 16 and FE Circular 34/2025
- Trade-finance to fund letters of credit, accepted bills, deferred-payment imports
- Foreign-currency interbank placements
- Capital-machinery imports and project finance — primary qualifying use
- Balancing, Modernisation, Replacement and Expansion (BMRE) of existing facilities
- Term lending to industrial enterprises in private sector
- Refinancing existing external commercial borrowings
- Long-term infrastructure projects in power, transport, telecommunication, real estate and special economic zones
- Tier-2 capital augmentation through subordinated foreign-currency debt (subject to specific BRPD approval)
Withholding Tax
on Interest Outflow
on Interest Outflow
Applicable under the Income Tax Act, 2023, but qualifying OBU borrowings enjoy statutory exemption on interest paid to overseas lenders pursuant to NBR S.R.O. No. 100-Ain/Aykor-29/2024 read with the Offshore Banking Act, 2024. Effective WHT rate on non-OBU interest outflows is typically 20% subject to DTAA reduction.
Applicable under the Income Tax Act, 2023; the rate is reduced where Bangladesh has a Double Taxation Avoidance Agreement (DTAA) with the lender's tax-residence jurisdiction (Bangladesh has DTAAs with approximately 38 countries). Exemption available for OBU-booked qualifying loans within statutory parameters. Tax residency certificates from the lender are required to claim DTAA relief.
Reporting Obligations
Monthly returns under GFET-2018 Vol-2; FEPD statistical filings; reporting to BB Statistics Department; CIB reporting for downstream credit; FX exposure reporting under the FX Risk Management Guidelines; Form L (Loan) returns; OBU online portal reporting under FE Circular 11/2025; quarterly returns to the Department of Off-site Supervision (DOS).
Certified copy of executed loan agreement to BIDA, FEPD and the BB Statistics Department within 14 days; ongoing repayment, drawdown and utilisation reports; sponsor undertakings; CIB checks for on-lent borrowers; quarterly external debt monitoring to the Forex Reserve and Treasury Management Department; annual disclosure in audited financial statements; reporting to FEID for any equity-linked or convertible features.
Single-Borrower Exposure Cap
No direct cap at the borrowing leg, but downstream lending of borrowed FCY proceeds is subject to BRPD Master Circular on Single-Borrower Exposure Limit: total outstanding facilities to any single person/enterprise/group cannot exceed 35% of the bank's total capital, with funded facilities capped at 15% of total capital. Large-loan reporting applies above the 10% threshold.
Same downstream cap of 35%/15% applies. Project-finance and infrastructure exceptions may be granted by BB on case-specific application. Concentration risk is independently assessed by DOS and BRPD during on-site inspection.
Capital & Prudential Treatment
- OBU exposures: 2.0% CRR maintenance with BB on bi-weekly average basis
- 1.5% daily provision against average total demand and time liabilities (ATDTL)
- Asset classification under BRPD Circular No. 14 (2012) and subsequent updates
- Counts as foreign-currency liability for net open position monitoring
- Treated as foreign-currency liability; impacts CRAR, leverage ratio, NSFR and LCR under the Risk-Based Capital Adequacy framework (Basel III, Bangladesh edition)
- Stress-tested for FX shock and rollover risk under ICAAP / Pillar 2 / SREP
- Subordinated debt qualifying for Tier-2 capital subject to specific BRPD eligibility criteria
- Asset-liability matching and maturity-bucket reporting required
Documentation Pack
Term sheet; ISDA-style master agreement (where applicable); facility letter; KYC/CDD pack on the lender; AML and sanctions screening clearance; Board Resolution authorising the borrowing; AD declaration; correspondent-bank account opening forms; Form-L; loan-tracking sheet for OBU portal.
Full loan agreement (English) duly executed; certified copy of Memorandum and Articles of Association; Certificate of Incorporation; Board Resolution; CIB report; sponsor and director undertakings; feasibility report including IRR, break-even, debt-equity ratio, DSCR (base and sensitive cases); bank certificate on creditworthiness; legal opinion (counsel of record); tax-structure memorandum; security documents (where applicable); intercreditor agreement (for syndicated facilities); process agent appointment; condition-precedent satisfaction certificates.
Security & Charge Creation
Generally unsecured at the bank-borrower level; trade-finance lines often supported by the underlying trade documents (LCs, bills of exchange, shipping documents). No charge registration with RJSC typically required.
Often secured: pledge of receivables, mortgage of fixed assets, pledge of shares, assignment of contracts. Charge creation triggers registration obligations under section 159 of the Companies Act, 1994 with RJSC within 21 days. Mortgages over land require registration under the Registration Act, 1908. Movable property security may use the framework of the Secured Transactions (Movable Property) Act, 2023.
Repayment & Remittance
Principal and interest repayments through the AD channel; AD authorises remittance under general permission once the underlying transaction is verified. No prior BB approval needed for repayment of properly contracted short-term lines.
Remittance of principal, interest and fees through AD subject to BB approval at the time of agreement execution. Each remittance is supported by the registered loan agreement reference number; pre-payment may require fresh BB approval if outside the originally approved schedule.
AML / CFT Diligence
Enhanced Due Diligence (EDD) on the overseas lender; sanctions screening against UN, OFAC, EU, UK Treasury, and the Domestic Sanctions List of Bangladesh; STR triggers under BFIU Master Circular; ultimate beneficial ownership identification; politically exposed person (PEP) screening.
Same EDD requirements, with additional scrutiny given the larger ticket size and longer relationship duration. Source-of-funds verification for the lender; ongoing transaction monitoring; periodic risk re-assessment; FATCA/CRS implications where applicable.
Dispute Resolution & Recovery
Recovery actions (rare for short-term inter-bank lines) typically governed by the law of the contract — usually English or New York law. Enforcement in Bangladesh would proceed through the Money Loan Court Act, 2003 (Artha Rin Adalat Ain) for any local-court action.
Foreign-law governed agreements with arbitration clauses (typically SIAC, LCIA, or ICC). Enforcement in Bangladesh of foreign judgments/awards under the Code of Civil Procedure, 1908 and the Arbitration Act, 2001. BB-mandated ADR provisions and BIAC mediation are increasingly built into long-term facility documentation.
03 · APPLICABLE LAWS, RULES & CIRCULARS
Regulatory instruments by tenure
Each instrument is tagged for short-term applicability SHORT long-term applicability LONG or both BOTH meaning the instrument applies regardless of tenure. The tables are grouped by instrument type for quick reference.
A
Primary Legislation — Acts of Parliament
| Instrument | Applies To | Why It Applies / Operative Provisions |
|---|---|---|
|
Constitutive · Central Bank
Bangladesh Bank Order, 1972
President's Order No. 127 of 1972
|
BOTH | The constitutive charter of Bangladesh Bank. Source of all licensing, supervision, FX-policy and circular-issuing authority. Article 18 declares the convertible currency basket usable for all foreign-exchange transactions including borrowing. Article 7A empowers BB to formulate and implement monetary, credit and exchange policies. |
|
Banking · Operative
Bank Company Act, 1991
Act No. 14 of 1991 (as amended)
|
BOTH | The operative banking law for scheduled banks. Section 5(o) defines "banking company". Section 26 covers requirements for capital and reserves. Section 27 deals with restrictions on loans and advances. Section 45 empowers BB to issue binding directions including all circulars on FCY borrowing. Section 109 covers the power to impose financial penalty for violation. |
|
Forex · Constitutive
Foreign Exchange Regulation Act, 1947
Act VII of 1947, as amended by FERA (Amendment) Act, 2015
|
BOTH | The constitutive statute for any foreign-currency transaction. Section 3 empowers BB to authorise dealers. Section 4 restricts dealing in foreign exchange. Section 5 regulates payments. Section 13 covers permission for borrowing in foreign currency. Section 18A covers service-sector remittances. All FEPD circulars are issued in exercise of its delegated powers. The 2015 Amendment Act introduced criminal penalties for hundi and unauthorised forex transactions. |
|
Offshore · New Framework
Offshore Banking Act, 2024
Act No. 2 of 2024 (Gazette: 14 March 2024)
|
BOTH | Governs OBU operations through which most external borrowings are now booked. Provides the legal basis for tax exemption on OBU interest income/outflows. Restricts offshore banking to scheduled banks operating in Bangladesh holding a BB-issued OBU licence. Permits operations in five convertible currencies. Replaces the patchwork of circulars dating to 1985. |
|
Resolution Framework
Bank Resolution Ordinance, 2025
Ordinance No. of 2025
|
BOTH | Modern resolution framework for distressed banks. Affects creditor ranking and bail-in provisions for external creditors; relevant for long-term lender comfort and pricing. Replaces older provisions under the Bank Company Act and the Bankruptcy Act, 1997 for systemic banks. |
|
AML · Substantive
Anti-Money Laundering Act, 2012
Act No. 5 of 2012, amended by Act No. 9 of 2015
|
BOTH | Mandates KYC, customer due diligence, transaction monitoring, suspicious-transaction reporting, and ultimate-beneficial-ownership identification for cross-border lender relationships. Empowers the Bangladesh Financial Intelligence Unit (BFIU). The 2015 Amendment broadened predicate offences and tightened reporting timelines. |
|
CFT · Substantive
Anti-Terrorism Act, 2009
Act No. 16 of 2009, amended by Act No. 11 of 2013
|
BOTH | Combats terrorism financing — mandatory sanctions screening of overseas lenders against UN designations and the Domestic Sanctions List of Bangladesh. The 2013 Amendment expanded the framework to align with FATF recommendations. |
|
Tax · Substantive
Act No. 12 of 2023 (replacing the Income Tax Ordinance, 1984)
|
BOTH | Withholding tax on interest paid to non-resident lenders. Section 117 covers WHT on interest. DTAA relief available where applicable. OBU statutory exemption applies for qualifying loans. Tax residency certificate required for treaty relief. |
|
Tax · OBU Specific
NBR S.R.O. No. 100-Ain/Aykor-29/2024
Statutory Regulatory Order under the Income Tax Act, 2023
|
BOTH | Statutory Regulatory Order issued by the National Board of Revenue exempting interest income/outflows of qualifying offshore banking unit transactions from income tax — operationalises the tax incentives provided under the Offshore Banking Act, 2024. |
|
Corporate · Borrowing Powers
Act No. 18 of 1994
|
BOTH | Internal corporate authorisation framework. Section 76 on borrowing powers; Section 159 on charge registration with RJSC within 21 days; AGM/EGM approvals where the borrowing exceeds prescribed thresholds. |
|
Stamp Duty
Stamp Act, 1899
Act No. 2 of 1899 (as amended)
|
BOTH | Loan agreements executed in or brought into Bangladesh require ad valorem stamp duty. Mortgage and charge documents attract additional duty under the prevailing Stamp Schedule. |
|
Property · Mortgage
Transfer of Property Act, 1882
Act No. 4 of 1882
|
LONG | Governs creation of mortgages over immovable property — frequently used for security in long-term external borrowings. Sections 58–104 cover the various forms of mortgage available in Bangladesh. |
|
Property · Registration
Registration Act, 1908
Act No. 16 of 1908
|
LONG | Mandatory registration of mortgage deeds (where consideration exceeds BDT 100) and other security instruments at the Sub-Registry Office having jurisdiction over the property. |
|
Security · Movable
Secured Transactions (Movable Property) Act, 2023
Act No. 56 of 2023
|
LONG | New unified framework for security interests over movable property — receivables, inventory, intangibles. Establishes a centralised collateral registry. Particularly relevant for long-term project finance with security over moveable assets. |
|
Recovery · NPL
Money Loan Court Act, 2003 (Artha Rin Adalat Ain)
Act No. 8 of 2003
|
BOTH | Specialised courts for speedy recovery of defaulted loans by banks and financial institutions. Section 22 mandates ADR/mediation before adjudication. The default forum for any recovery action by a Bangladeshi bank against a borrower of on-lent FCY proceeds. |
|
Banking Instruments
Negotiable Instruments Act, 1881
Act No. 26 of 1881
|
SHORT | Governs cheques, promissory notes and bills of exchange — the underlying instruments in trade-finance lines, accepted-bill financing and supplier's/buyer's credit arrangements. |
|
Evidence
Bankers' Books Evidence Act, 2021
Act No. 7 of 2021 (replacing the 1891 Act)
|
BOTH | Modernises admissibility of digital banking records as evidence in legal proceedings — relevant for any disputes arising under foreign-currency credit facilities and for production of certified extracts in recovery proceedings. |
|
Insolvency
Bankruptcy Act, 1997
Act No. 10 of 1997
|
BOTH | Default insolvency framework for entities not falling within the Bank Resolution Ordinance, 2025. Relevant for the lender's risk assessment of the bank's downstream borrowers when on-lending FCY proceeds. |
|
Deposit Protection
Bank Deposit Insurance Act, 2000
Act No. 18 of 2000
|
BOTH | Establishes the Deposit Insurance Trust Fund. Foreign-currency liabilities arising from external borrowing affect the bank's insurable deposit base and contribute to systemic risk monitoring. |
|
Financial Reporting
Financial Reporting Act, 2015
Act No. 16 of 2015
|
BOTH | Establishes the Financial Reporting Council. Mandates IFRS/IAS-compliant disclosure of foreign-currency liabilities, FX exposures, and related-party transactions in audited financial statements of scheduled banks. |
|
Payments
Payment and Settlement Systems Act, 2024
Act of 2024
|
BOTH | Governs payment systems including BD-RTGS used for the cross-border settlement of foreign-currency loan disbursements and repayments. Prescribes operational standards for payment service providers. |
|
Customs / Imports
Customs Act, 1969 & Import Policy Order in force
Act No. 4 of 1969
|
SHORT | Trade-finance lines support imports — the underlying import transactions must comply with the Customs Act and the prevailing Import Policy Order; admissibility of items imported on usance basis under supplier's/buyer's credit is conditional on IPO compliance. |
|
Investment Promotion
Bangladesh Investment Development Authority Act, 2016
Act No. 38 of 2016
|
LONG | Establishes BIDA as the apex investment promotion agency and the receiving authority for foreign loan applications routed through the OSS portal where the end-use is industrial. The Scrutiny Committee operates downstream of BIDA processing. |
|
Special Zones
Acts No. 36 of 1980 and No. 42 of 2010
|
BOTH | Governs export processing zones and economic zones. Critical because Type-A enterprises within EPZs/EZs/Hi-Tech Parks may obtain FCY loans from overseas without prior BIDA/BB approval — affects the regulatory mapping of OBU on-lending. |
B
Bangladesh Bank Guidelines & Master Documents
| Instrument | Applies To | Why It Applies / Operative Provisions |
|---|---|---|
|
Master Reference
Guidelines for Foreign Exchange Transactions (GFET), 2018 — Vol. 1 & Vol. 2
Bangladesh Bank · Foreign Exchange Policy Department
|
BOTH | The master compendium for all Authorised Dealer operations. Volume 1 contains the substantive instructions; Chapter 16 specifically governs term lending and borrowing in foreign currency. Chapter 7 deals with import payment provisions including supplier's/buyer's credit. Volume 2 contains forms, returns and reporting templates. The reference text for every routine cross-border transaction. |
|
Procedural · Foreign Borrowing
Guidelines for Foreign Borrowing — BIDA / Scrutiny Committee Framework
Issued under BIDA Act, 2016 read with FERA
|
LONG | The substantive procedural framework for medium- and long-term foreign borrowing approval. Sets out eligibility criteria (private-sector industrial enterprises incorporated under Companies Act 1994 and registered with BIDA), all-in-cost ceiling guidance, application proforma, supporting document requirements, and the Scrutiny Committee approval process headed by the Governor of Bangladesh Bank. |
|
Risk Management
Foreign Exchange Risk Management Guidelines (revised, Feb 2025)
FEPD Circular Letter No. 12 dated 26 February 2025
|
BOTH | Mandates ALM/FX-risk treatment of foreign-currency liabilities; nostro management; treasury front/middle/back-office segregation; net open position limits; intraday and overnight FX exposure caps; counterparty limits for foreign correspondent relationships. |
|
Capital Adequacy
Risk-Based Capital Adequacy Framework — Basel III, Bangladesh Edition
BRPD-issued framework (revised periodically)
|
BOTH | Foreign borrowings count as on-balance-sheet liabilities; impact CRAR (minimum 12.5% including capital conservation buffer), leverage ratio (minimum 3%), Net Stable Funding Ratio (NSFR ≥ 100%), and Liquidity Coverage Ratio (LCR ≥ 100%). Subordinated FCY debt may qualify for Tier-2 capital subject to specific criteria. |
|
Stress Testing
Stress Testing & ICAAP Guidelines
DOS / BRPD Joint Issuance
|
LONG | Long-term FCY liabilities require quantitative stress-testing for FX shock, interest-rate shock, and rollover risk under Pillar 2 of the Supervisory Review & Evaluation Process (SREP). Submissions to DOS on quarterly and annual cycles. |
|
Credit Risk
Credit Risk Management Guidelines
BRPD-issued (revised periodically)
|
BOTH | Sets prudential standards for credit exposure assessment, single-borrower limits, large-loan reporting (10% threshold), and concentration risk — directly applicable to downstream on-lending of borrowed FCY funds. |
|
AML/CFT Master
BFIU Master Circular on AML/CFT (latest edition)
Bangladesh Financial Intelligence Unit
|
BOTH | The operational AML/CFT manual: enhanced due diligence on cross-border lender; sanctions screening (UN, OFAC, EU, UK Treasury, domestic list); STR/CTR triggers; UBO identification thresholds; PEP screening; record-keeping for minimum 5 years. |
|
Code of Conduct
BB Code of Conduct for Banks & Financial Institutions
BRPD Circular No. 16 of 2017
|
BOTH | Mandates a comprehensive Code of Conduct binding directors, key executives and staff. Establishes integrity, ethics, due skill, conflict-of-interest restrictions, and confidentiality obligations relevant to cross-border lender relationships. |
|
Corporate Governance
BRPD-issued framework
|
BOTH | Board approval procedures for material borrowings; fit-and-proper test for directors approving foreign-currency liabilities; risk-management committee oversight; independent director participation in approving large external commitments. |
C
Bangladesh Bank Circulars & Circular Letters
| Instrument | Applies To | Why It Applies / Operative Provisions |
|---|---|---|
|
FEPD · OBU Master
FE Circular No. 11
30 January 2025 — Issued under Offshore Banking Act, 2024
|
BOTH | Master OBU Guidelines. Comprehensive framework for offshore banking operations: OBU licensing, permitted sources of funds (including borrowing from overseas), eligible deposit-takers, approved end-uses (trade finance, capital-machinery imports, term lending), prudential rules, reporting obligations, and CIB reporting. Supersedes BRPD Circulars 02/2019, 04/2024, FE Circular 19/2023, and FE Circular Letter 13/2024 — though contracts under those circulars run to expiry. |
|
FEPD · Loans Master
FE Circular No. 34
2 September 2025
|
BOTH | Comprehensive consolidation of regulations on loans, overdrafts and guarantees — including medium and long-term external borrowing by enterprises in specialised zones, term lending in Taka to foreign-owned/controlled companies, private loans against guarantees lodged outside Bangladesh, and short-term shareholders' loans. Supersedes scattered earlier instructions. |
|
FEPD · Pricing
FEPD Circular Setting SOFR + 4.00% Ceiling
February 2024 (revising Sep 2022's 3.50% ceiling)
|
SHORT | Sets the SOFR-plus-margin all-in-cost cap for short-term trade-finance borrowing in foreign exchange. Covers SOFR (USD), EURIBOR (EUR), SONIA (GBP), TONA (JPY), LPR (CNY). Updated periodically; banks must verify the prevailing ceiling at each pricing event. |
|
FEPD · Account Operations
FE Circular No. 27
3 July 2025
|
BOTH | Permissible transactions against funds held in foreign currency accounts. Permits OBUs to allow FCY deposits of non-resident account-holders to be used by DBUs as collateral against short-term local-currency financing to resident borrowers — a structurally important provision for matching cross-border funding to local lending. |
|
FEPD · Trade Discount
FE Circular No. 31
31 July 2025
|
SHORT | Discounting of direct/deemed export bills admissible to industries outside specialised zones; trade-finance refinancing windows funded by overseas borrowings. Critical for matching short-term external funding to export-bill discounting business. |
|
FEPD · Forward Cover
FEPD Circular No. 09
26 January 2025
|
BOTH | Forward sales/purchases in foreign currency. ADs may apply forward premium not exceeding policy rates of respective currencies (Fed Funds, EUR MRR, GBP Bank Rate, JPY OCR, CNY LPR). Relevant for hedging principal/interest cash flows on the borrowing. |
|
FEPD · FX Risk
FEPD Circular Letter No. 12
26 February 2025
|
BOTH | Updated Foreign Exchange Risk Management Guidelines — addresses versatility, diversity, risk and innovation in FX market; treasury, ALM, counterparty exposure governance, intraday/overnight position limits. |
|
FEPD · Trade Finance
FE Circular No. 24
24 October 2024
|
SHORT | Short-term external trade finance on supplier's/buyer's credit for imports. Extends usance term from 360 days to 3 years for industrial enterprises in regular industries and those in EPZs, EZs, Hi-Tech Parks and other specialised zones. References paragraph 33(a) of GFET Vol-1 Chapter 7. |
|
FEPD · Trade Finance
FE Circular No. 32
19 November 2024
|
SHORT | Updates to short-term trade finance procedures and reporting — must be checked for any incremental conditions on FCY exposure arising from trade finance lines. |
|
FEPD · Service Sector
FEPD Circular No. 30
12 November 2024
|
SHORT | Service-sector remittance and short-term loan provisions; short-term shareholder/parent-company loans to foreign-owned service entities at maximum 3% p.a. interest in convertible currencies, up to 6 years from inception. |
|
FEPD · OBU Services
FEPD Circular Letter (Repatriation of Inward Remittances)
25 June 2025 — read with FE Circular 11/2025
|
BOTH | Outlines OBU operational permissions for advising, collection and settlement services; immediate transfer of repatriated funds through BD-RTGS to beneficiary banks. |
|
FEPD · Long-Term Refinancing
Long-Term Financing Facility (LTFF / BB-LTFF) Circulars
Various FEPD circulars (latest July 2023)
|
LONG | BB refinancing windows for long-term FCY loans to manufacturing exporters; PFI pricing band 180-day SOFR + 0.25%–1.25%; tenure 3–10 years inclusive of grace period not exceeding 12 months. Enables banks to fund long-term assets with matched-tenure foreign-currency liabilities. |
|
FEID · Investment Reporting
FEID Circular No. 01
27 January 2025 (also 20 November 2024)
|
LONG | Reporting framework for non-resident investment transactions, share issuances against FCY remittances, and equity-linked components. Applies where the long-term external borrowing has convertible features or warrants. |
|
BRPD · Single-Borrower Limit
BRPD Master Circular on Single-Borrower Exposure Limit
BRPD Circular No. 05 (April 2005) and subsequent amendments
|
BOTH | 35% of total capital per single borrower; 15% sub-limit for funded facilities. Issued under section 45 of the Bank Company Act, 1991. Constrains downstream on-lending of borrowed FCY proceeds to any single counterpart or group. |
|
BRPD · Asset Classification
BRPD Circular No. 14 dated 23 September 2012 (and updates)
Loan Classification & Provisioning
|
BOTH | Master rules on loan classification (Standard, Special Mention Account, Sub-Standard, Doubtful, Bad/Loss) and provisioning (1%–100%). Applies to assets created from on-lent FCY funds, including OBU exposures. |
|
BRPD · Mediation/ADR
BRPD Circular dated 16 April 2016 — ADR for Defaulted Loans
BRPD Circular Letter
|
BOTH | Encourages scheduled banks to use Bangladesh International Arbitration Centre (BIAC) for resolution of defaulted-loan disputes and to include ADR clauses in loan contracts. Banks must achieve minimum 1% ADR-recovery target by 30 June 2026. |
|
BRPD · Code of Conduct
BRPD Circular No. 16 of 2017
Code of Conduct for Banks & FIs
|
BOTH | Mandatory comprehensive Code of Conduct for directors, employees and management; declarations of secrecy; conflict-of-interest restrictions on personal gain. |
|
BRPD · Latest Direction
BRPD Circular No. 01 dated 2 January 2025
L/C Margin and Related Direction
|
BOTH | Latest BRPD policy direction setting cash-margin requirements and related conditions; should be reviewed for any incremental conditions on FCY exposure arising from import L/Cs. |
|
DMD · Reference Rate
DMD Circular No. 03
2026 — Effective from 15 April 2026
|
BOTH | Publication of an effective reference rate for the money-market segment — transaction-based interbank benchmark replacing the quotation-based DIBOR. Long-term floating-rate documentation should incorporate the new reference rate and an appropriate fallback waterfall. |
|
DOS · Off-site
DOS Circulars on Off-site Supervision
Various — DOS-issued reporting templates
|
BOTH | Off-site supervision reporting templates including FCY exposure returns, large-loan returns (CL forms), CAMELS-rating inputs, and stress-testing returns. Direct relevance to monitoring of borrowed FCY positions. |
|
DFIM · Treasury Bonds
DFIM Circular Letter No. 10
Loan Facility Against Government Bond (Treasury Bond)
|
BOTH | Provisions for collateralised lending against Treasury Bonds — relevant where the bank pledges domestic GoB securities as cash-equivalent comfort to overseas lenders. |
|
DTAA
Applicable Bilateral Tax Treaty
~38 DTAAs in force
|
BOTH | Reduced withholding rate on interest where the lender resides in a DTAA-partner jurisdiction (typically 10–15% under treaty vs 20% domestic rate). Tax-residency certificate from the lender's tax authority required to claim relief. |
|
International · Trade Rules
ICC Uniform Rules — UCP 600, URDG 758, ISBP 745, URC 522
International Chamber of Commerce
|
SHORT | Trade finance instruments (LCs, guarantees, collections) underlying the bulk of short-term external borrowing are governed by ICC's uniform rules; banks contractually adopt these in their cross-border arrangements. |
04 · AUTHORITIES & THEIR ROLE
Who oversees what
External borrowing by a Bangladeshi bank involves coordination across multiple regulators and central-bank departments. The map below identifies each touchpoint.
| Authority | Tenure Relevance | Function in External Borrowing |
|---|---|---|
Foreign Exchange Policy DepartmentFEPD · Bangladesh Bank |
BOTH | The lead regulator for all foreign-exchange transactions including external borrowing. Issues FE Circulars; sets all-in-cost ceilings; approves non-routine borrowing structures; receives statistical filings. |
Foreign Exchange Investment DepartmentFEID · Bangladesh Bank |
LONG | Receives reports on non-resident investment transactions; equity-linked components of long-term borrowings; share issuances against FCY remittances. |
Foreign Exchange Operation DepartmentFEOD · Bangladesh Bank |
BOTH | Operational oversight of AD activities; receives monthly returns under GFET Vol-2; processes specific transaction permissions. |
Banking Regulation & Policy DepartmentBRPD · Bangladesh Bank |
BOTH | Issues prudential standards (single-borrower limits, classification, provisioning, capital adequacy, code of conduct); change-of-control approval; oversight of the borrowing bank's overall regulatory standing. |
Department of Off-site SupervisionDOS · Bangladesh Bank |
BOTH | Off-site monitoring through CAMELS, stress-testing returns, large-loan returns, CL statements, FCY exposure reports. |
Department of Foreign Exchange InspectionDFEI · Bangladesh Bank |
BOTH | On-site inspection of AD compliance with FERA, GFET and FE circulars; specific examination of cross-border borrowing books and OBU operations. |
Forex Reserve & Treasury Management DepartmentFRTMD · Bangladesh Bank |
BOTH | Monitors aggregate external debt of the banking system; manages BB's own forex reserves; receives quarterly external-debt monitoring reports. |
Statistics DepartmentStat Dept · Bangladesh Bank |
BOTH | Compiles balance-of-payments statistics; receives certified copies of executed loan agreements; aggregates external-debt data for IMF reporting. |
Bangladesh Financial Intelligence UnitBFIU · Bangladesh Bank |
BOTH | AML/CFT supervisor; receives STRs/CTRs on cross-border inflows; issues sanctions list updates; conducts thematic AML inspections. |
| LONG | Apex investment promotion agency; receives long-term FCY loan applications via the OSS portal at bidaquickserv.org; conducts initial scrutiny before forwarding to the BB Scrutiny Committee. | |
Scrutiny CommitteeHeaded by BB Governor |
LONG | The final approval body for medium- and long-term foreign borrowings. Evaluates commercial viability, indebtedness, creditworthiness, repayment terms, debt-equity ratio, and capital-machinery quality. |
| BOTH | Tax authority; administers WHT on interest outflows; issues SROs (e.g. S.R.O. 100/2024 on OBU exemption); processes DTAA relief applications; oversees stamp duty. | |
| LONG | Charge registration under Companies Act 1994 section 159; receives mortgage and floating-charge filings within 21 days of creation. | |
Bangladesh International Arbitration CentreBIAC |
BOTH | Domestic ADR forum encouraged by BB for dispute resolution; banks may execute MOUs with BIAC and include ADR clauses in long-term facility documentation. |
Financial Reporting CouncilFRC |
BOTH | Oversees IFRS/IAS-compliant disclosure of FCY liabilities and FX exposures in audited financial statements under the Financial Reporting Act, 2015. |
05 · AT-A-GLANCE
The 60-second summary
If you only have a minute before walking into a deal call, the differences below are the ones to remember.
Short-Term Borrowing
≤ 12 MONTHS · TRADE & LIQUIDITY
- No prior BB approval — operates under general permission contained in GFET-2018 and FE Circulars
- Booked predominantly through the Offshore Banking Unit; statutory tax exemption on interest paid to overseas lenders under the Offshore Banking Act, 2024
- All-in-cost cap: SOFR / EURIBOR / equivalent + 4.00% p.a.
- Tenure 30–360 days (extended up to 3 years for industrial usance under FE Circular 24/2024)
- Lenders: international correspondent banks, foreign OBUs, ACU member-bank lines, multilateral trade-finance programs
- Reporting: monthly under GFET Vol-2 + FEPD statistical returns + OBU online portal + CIB
- Documentation: term sheet, AD declaration, KYC pack, Board Resolution, Form-L
- Annual market size: approximately USD 3–4 billion across the Bangladeshi banking system
- Generally unsecured at the bank-borrower level; underlying trade documents provide indirect security
Long-Term Borrowing
> 12 MONTHS · TERM & PROJECT
- Scrutiny Committee approval required — chaired by the Governor of Bangladesh Bank
- Application routed through BIDA's Online Single Service portal where end-use is industrial; processed in 3–6 months
- All-in-cost: market-rate benchmark + reasonable risk premium; excessive premium attracts heightened review
- Tenure typically 3–10 years; grace period not exceeding 12 months; bond issuances may be longer
- Lenders: international banks, multilaterals (IFC, ADB, FMO, DEG, OPIC), ECAs, capital-market investors, equipment suppliers
- Reporting: certified executed agreement to BIDA + FEPD + Statistics Department within 14 days; ongoing utilisation reports
- Documentation: full loan agreement, M&AA, feasibility, DSCR, CIB, sponsor undertakings, legal opinion, tax memo, security documents
- DTAA relief available on interest WHT; OBU exemption for qualifying loans
- Often secured: charge registration with RJSC under Companies Act 1994 section 159 within 21 days
06 · PRACTICE NOTES
Nine things worth keeping in mind
Issues that materially affect execution but are easy to miss when you're moving fast through term-sheet negotiation.
Note 01 · OBU is the default channel for cross-border borrowing
For most external borrowings by scheduled banks today, booking through the Offshore Banking Unit is the optimal route — it carries statutory tax exemptions on interest paid to overseas lenders pursuant to NBR S.R.O. No. 100/2024, simpler reporting, and a single-window regulator (FEPD). The Offshore Banking Act, 2024 has consolidated what was previously a patchwork of circulars dating back to 1985, giving lenders a stable statutory framework instead of administrative discretion. That said, banks should map their OBU on-lending pipeline carefully — recent CRR/SLR impositions and prudential tightening have closed some of the historical arbitrage.
Note 02 · The SOFR + 4% ceiling is dynamic
The all-in-cost ceiling for short-term trade finance has moved from SOFR + 3.00% (mid-2022) to SOFR + 3.50% (September 2022) to SOFR + 4.00% (February 2024). Each adjustment reflects BB's effort to retain attractiveness for foreign lenders against the global rate cycle and the country's reserves position. Always confirm the prevailing FEPD circular before pricing a new line — what was permitted six months ago may no longer be the ceiling, and breaches expose the AD to FERA penalties under section 23.
Note 03 · Long-term routing is end-use driven
Long-term foreign borrowing approval is anchored on the eventual deployment of funds. If the bank borrows to on-lend to industrial enterprises, BIDA processing through the OSS portal precedes Scrutiny Committee review. If for general balance-sheet funding or financial-sector use, FEPD-direct application applies. If for Tier-2 capital augmentation through subordinated debt, additional BRPD eligibility scrutiny applies. Get the routing right at term-sheet stage, not at agreement-execution stage — switching tracks mid-process can cost months.
Note 04 · DIBOR is being replaced by a transaction-based benchmark
Bangladesh Bank has confirmed a transition from quotation-based DIBOR to a transaction-based interbank benchmark (modelled on SOFR), effective from 15 April 2026, under DMD Circular No. 03. Long-term floating-rate documentation executed during the transition period should incorporate the new reference rate and an appropriate fallback waterfall. Existing facilities pegged to DIBOR should consider proactive amendment letters to avoid post-cessation interpretive risk.
Note 05 · Single-borrower limits constrain downstream use
Borrowing externally is one thing; deploying the proceeds as debt financing is another. The 35% / 15% single-borrower exposure cap under the BRPD Master Circular applies to every Taka and every Dollar of on-lending. Plan the funding-to-asset matching before drawdown — sponsor pressure to commit foreign-currency on-lending to a single large client can quickly breach the funded-facility sub-limit and trigger DOS-led intervention. Large-loan reporting at the 10% threshold requires advance planning of disclosure timing.
Note 06 · Stamp duty and charge registration are routinely overlooked
Loan agreements brought into Bangladesh attract ad valorem stamp duty under the Stamp Act, 1899. Where security is offered, charge creation requires registration with the Registrar of Joint Stock Companies & Firms within 21 days under Companies Act, 1994 section 159 — failure renders the security unenforceable against a liquidator or subsequent secured creditor. Mortgages of immovable property require additional registration under the Registration Act, 1908, and the Secured Transactions (Movable Property) Act, 2023 introduces a new central registry for moveable-asset security that should be considered at the structuring stage.
Note 07 · DTAA relief is conditional on documentation
Interest payments to overseas lenders are subject to WHT at 20% under the Income Tax Act, 2023, but the rate may be reduced under an applicable Double Taxation Avoidance Agreement (Bangladesh has approximately 38 DTAAs in force, with reduced treaty rates typically 10–15%). The reduction is conditional on production of a valid Tax Residency Certificate from the lender's home tax authority; in its absence, the full 20% domestic rate applies. Build the TRC requirement into the conditions precedent and refresh it annually.
Note 08 · AML diligence on overseas lenders is non-negotiable
Even where the lender is a household-name international bank, the BFIU Master Circular requires Enhanced Due Diligence: sanctions screening (UN, OFAC, EU, UK Treasury, and the Domestic Sanctions List of Bangladesh), ultimate-beneficial-ownership identification, PEP screening, and ongoing transaction monitoring. The Anti-Money Laundering Act, 2012 imposes personal liability on the Chief Executive and Chief Anti-Money Laundering Compliance Officer for systemic failures. Build the diligence file at onboarding and refresh it at each renewal.
Note 09 · Strategic Structuring with LegalSeba LLP
Given the strict compliance requirements of the Bangladesh Bank and BIDA, structuring a foreign loan by the financing company, leasing company, credit company, or bank requires specialized legal oversight. As a top-tier corporate and financial law firm in Bangladesh, LegalSeba LLP routinely assists clients in mitigating cross-border financing risks. We guide financial institutions through the regulatory approval pathways, ensuring that facility agreements, security documents, and tax-structuring memos comply with the latest statutory updates for seamless fund repatriation and enforcement.
Legal Disclaimer
This regulatory reference is provided by LegalSeba LLP for informational and educational purposes only and does not constitute formal legal, financial, or tax advice. While every effort has been made to ensure the accuracy of the information regarding Bangladesh Bank regulations, BIDA guidelines, and applicable statutes as of FY 2025–26, the regulatory landscape is subject to frequent change. Reliance on this material is strictly at your own risk. Institutions and individuals should seek tailored professional advice from qualified legal counsel before executing any cross-border financing transaction, submitting regulatory applications, or making binding financial commitments. LegalSeba LLP disclaims all liability for actions taken or not taken based on the contents of this document.
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