| 1. | INTRODUCTION | |
| On March 24, 1994 the Bangladesh Taka was declared convertible for current account transactions in terms of Article VIII of the IMF Articles of Agreement. | ||
| The declaration symbolized a turning point in the country’s exchange management and exchange rate systems. The period preceding this declaration saw an intensification of reforms undertaken by Bangladesh Bank to ease controls on foreign payments and exchange rate arrangements. These reforms and the subsequent further changes have been summarized in the following paragraphs. The relevant FE Circulars/Notifications contain the details. | ||
| 2. | FOREIGN INVESTMENT | ||
| 2.1 | Investment in Bangladesh: | ||
| With the exception of a few reserved sectors, foreign investors are free to make investments in Bangladesh in industrial enterprise. An industrial entity may be set up in collaboration with local investors or may even be wholly owned by the foreign investors. No permission is needed to set up such enterprises if the entrepreneurs use their own funds. However, to avail of facilities and institutional suport provided by the government, entrepreneurs/sponsors are advised to apply for registration with the Board of Investment (BOI). For items in the control list, the office of the Chief Controller of Imports & Exports (CCI & E) prescribes the basis and conditions of import entitlement. Shares may be issued in favour of foreign investors against capital machinery brought into Bangladesh. For issuance of shares against foreign investment in the form of capital machinery, the exchange control copy of bill of entry evidencing clearance of the capital machinery from the Custom Authorities, copies of the relative import permit, invoice and bill of lading are required. | |||
| 2.2 | Investment in shares/securities by non-residents: | ||
| a) Non-residents are free to invest in shares / securities quoted in the stock exchanges, with foreign exchange sent or brought into Bangladesh. | |||
| b) They may also invest in new, yet-to-be-listed public issues of Bangladeshi shares/securities. In such cases investors are not required to transact through any registered broker/member of stock exchange. 5% shares of Initial Public Offering (IPO) of a company is reserved for Non-Resident Bangladeshi (NRB). Non-Resident Bangladeshi (NRB) can purchase/subscribe securities in foreign currency through "Foreign Currency Account for IPO" opened for the purpose only by the issuing company. Over subscription can be repatriated after completion of formalities. | |||
| c) Permission of Bangladesh Bank is not required for issue and transfer of shares in favour of non-residents against their investments in joint ventures in Bangladesh. | |||
| d) Non-resident share holders can freely transfer their shares to other non-residents. | |||
| 2.3 | Remittance of profits: | ||
| Branches of foreign firms/companies including foreign banks, insurance companies and financial institutions are free to remit their post-tax profits to their head offices through banks authorized to deal in foreign exchange (Authorized Dealers) without prior approval of Bangladesh Bank. | |||
| 2.4 | Remittance of dividend/capital gain: | ||
| Prior permission of Bangladesh Bank is not required for : - remittance of dividend income to non-residents in respect to their investments in Bangladesh; - remittance of dividend declared out of previous year's accumulated reserves; and - dividend and sale proceeds (including capital gains) of shares of companies listed in a Stock Exchange in Bangladesh. Such remittance may be effected prior to actual payment of taxes provided that the amount payable to the tax authorities at the applicable tax rate is withheld by the company. Remittance of sale proceeds of shares of companies not listed in Stock Exchange requires prior Bangladesh Bank permission, which is accorded for amounts not exceeding the net asset values of the shares. | |||
| 2.5 | Remittance of salaries and savings by expatriates: | ||
| Expatriates working in Bangladesh with the approval of the Government may remit through an Authorized Dealer (AD) 50% of salary and 100% of leave salary as also actual savings and admissible pension benefits. No prior Bangladesh Bank approval is necessary for such remittances. | |||
| 2.6 | Remittanceof royalty/technical fees: | ||
| Industrial enterprises may enter into agreements for payment of royalties, technical know-how/technical assistance fees abroad without prior permission if the total fees and other expenses connected with technology transfer do not exceed (a) 6% of the previous year’s sales of the enterprises as declared in their tax returns, or (b) 6% of the cost of imported machinery in the case of new projects. These agreements, however, need to be registered with the Board of Investment (BOI). Agreements not in conformity with these general guidelines require prior permission of the BOI. ADs may remit the royalties, technical know-how/technical assistance fees payable as per agreements registered with/approved by BOI, without prior approval of Bangladesh Bank. | |||
| 2.7 | Remittance on account of training and consultancy: | ||
| Industrial enterprises producing for the local market may remit through ADs up to 1% of their sales as declared in their previous year's tax returns for the purpose of training and consultancy services without prior approval of Bangladesh Bank. | |||
| 2.8 | Remittance by shipping lines, airlines, courier service companies: | ||
| Foreign shipping lines, airlines and courier service companies may send abroad, through an AD, funds collected in Bangladesh towards freight and passage, after adjustment of local costs and taxes, if any. | |||
| 3. | FOREIGN AND LOCAL BORROWINGS | ||
| 3.1 | Foreign loans: | ||
| Industrial enterprises in Bangladesh (local, foreign or joint venture) may borrow abroad with prior Board of Investment (BOI) approval. Remittances towards payment of interest and repayment of principal as per terms of BOI approved borrowing may be made through ADs without prior Bangladesh Bank approval. | |||
| 3.2 | Local borrowings: | ||
| Banks in Bangladesh may extend working capital loans or term loans in local currency to foreign-controlled or foreign-owned firms/companies (manufacturing or non-manufacturing) operating in Bangladesh on the basis of normal banker-customer relationship, without reference to Bangladesh Bank Banks in Bangladesh are free to grant local currency loans to joint venture industries in EPZ up to the amount of short term foreign currency loans obtained from abroad. | |||
| 4. | CONVERTIBILITY ON TRADE ACCOUNT | ||
| Bangladesh Taka is fully convertible for settlements of trade related transactions. Import licence is not required for import of items not in the control list. An importer has automatic access to foreign exchange for import of all items outside the control list, and also for import of control list items as per general or specific authorization of the office of the Chief Controller of Imports and Exports. | |||
| 5. | EXCHANGE FACILITIES FOR EXPORTERS | ||
| 5.1 | New Exporters : Annual foreign exchange quota for business travel abroad for new exporters has been set at US $ 6000. Bonafide requirement beyond US $ 6000 is accommodated by Bangladesh Bank upon written request submitted with supporting documentation. | ||
| 5.2 | Retention Quota for merchandise exporters:Merchandise exporters may retain up to 50% of realised FOB value of their exports in foreign currency accounts in US$, Euro, Japanese Yen. For export items with high import contents (such as naptha, furnace oil, bitumen, readymade garments etc.), the retention quota is 10%. The computer software and data entry/processing service exporters may also retain up to 50% of realised export proceeds in foreign currency accounts. Funds from these accounts may be used to meet bonafide business expenses, such as business visits abroad, participation in export fairs and seminars, import of raw materials, machineries and spares etc. Funds from these accounts may also be used to set up offices abroad without prior permission of Bangladesh Bank. Exporters may, at their option, retain the foreign currency in interest bearing renewable term deposit accounts in Bangladesh with a minimum amount of USD 2,000 or Pound Sterling 1,500 equivalent. | ||
| 5.3 | Retention quota for service exporters : Service exporters may retain 5% of their repatriated income in foreign currency accounts. Funds may be drawn from these accounts to meet expenses for bonafide business expenses abroad. This quota may also be kept in interest bearing renewable term deposit accounts. However, foreign exchange earnings on account of indenting commission or agency commission for export from Bangladesh may not be credited to such accounts since these incomes originate from Bangladesh sources. | ||
| 6. | DECLARATION OF FOREIGN EXCHANGE ON FORM ‘FMJ ’ | ||
| Incoming passengers may bring in amount of foreign exchange with declaration on form FMJ at the time of arrival. No declaration is necessary for amounts up to US$ 3,000. For non-residents, the entire amount brought in with declaration, or up to US$ 3,000 brought in without declaration may be freely taken out at the at the time of departure. Up to US$ 3,000 brought in without declaration may also be retained and taken out freely by a person ordinarily resident in Bangladesh. | |||
| 7. | FOREIGN CURRENCY ACCOUNTS | ||
| 7.1 | NFCD Accounts: Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as the account holders desire. Amounts brought in by non-resident Bangladeshis can be deposited in foreign currency account any time after return to Bangladesh | ||
| 7.2 | F.CAccounts of non-resident Bangladeshis: Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or persons of Bangladesh origin working or self employed abroad can now be maintained as long as the account holders' desire. | ||
| 7.3 | Accounts: Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visits abroad. These accounts are termed as Resident Foreign Currency Deposit (RFCD) accounts. The amount brought in with declaration to customs authorities on form FMJ and up to US $ 5000 brought in without declaration may be credited to this account. However, proceeds of export of goods or services from Bangladesh and commission earnings arising from business deals in Bangladesh cannot be credited to such accounts. Balances of such accounts are freely remittable abroad. Balances of RFCD accounts may also be used by the accounts holders for their travel abroad in the usual manner. RFCD accounts may be opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or Japanese Yen and may be maintained as long as the account holders desire. Interest may be paid on these deposits if these are for a term of not less than one month and the balance is not less than US $ 1000 or Pound Sterling 500 equivalent. | ||
| 7.4 | F.CAccounts of other entities: ADs do not require prior permission of Bangladesh Bank for opening of foreign currency accounts of : -non-resident foreign persons/firms; -diplomatic missions in Bangladesh and their expatriates; -diplomatic bonded warehouses (duty free shops); -local and joint venture contracting firms employed to execute projects financed by foreign donors/international donor agencies; -Bangladesh nationals working in the international bodies in Bangladesh and drawing pay and allowances in foreign currency. | ||
| 7.5 | Maintaining of bank accounts abroad: Bank accounts outside Bangladesh opened by Bangladesh nationals while working abroad may now be maintained even after their return to Bangladesh. | ||
| 8. | VISITS ABROAD | ||
| 8.1 | Booking of Passage: No Bangladesh Bank approval is needed for booking of passage for Bangladesh nationals against payment in Taka. Prepaid Ticket Advice (PTA) in favour of foreign guests invited by Government, Semi-Government, autonomous organizations or bodies affiliated with UN agencies or other internationally recognized agencies may be issued without prior approval of Bangladesh Bank. Air tickets may be issued against payment in Taka to foreigners working in Bangladesh if they draw salaries in Bangladesh Taka or if the cost of the ticket is to be borne by the employer, as per terms of the work permits approved by Bangladesh Government. | ||
| 8.2 | PrivateTravel: Annual travel quota entitlement of Bangladesh nationals is US$ 1000 per person for visits to SAARC member countries and Myanmar (US$ 500 for overland visits), and US$ 3000 per person for visits to other countries. Bonafide requirements beyond these limits are accommodated by Bangladesh Bank on written request supported by satisfactory documentation. International credit cards may also be issued against such travel entitlements. Release of foreign exchange in excess of US$ 200, requires valid visa | ||
| 8.3 | Business travel quota for importers and manufacturers producing for domestic markets: i) Subject to an annual upper limit of US $ 5000, importers are entitled to business travel quotas @ 1% of their imports settled during the previous financial year. ii) Subject to an annual upper limit of US $ 5000, non-exporting producers are entitled to business travel quotas @ 1% of their turnover of the preceding financial year as declared in their tax returns. The same business organisation engaged in imports as well as production shall, however, draw business travel entitlement only on one count. | ||
| 8.4 | Education: Prior permission of Bangladesh Bank is not required for releasing foreign exchange in favour/on behalf of Bangladesh students studying abroad or intending to proceed abroad for studies. Remittances may be made through Authorised Dealers (ADs) for all regular courses. | ||
| 8.5 | Seminars and workshops: ADS may release allowance not exceeding US$ 200 per day for countries in the SAARC region and Myanmar and not exceeding US$ 250 per day for all other countries to private sector participants for attending seminars, conferences and workshops arranged by recognized bodies | ||
| 8.6 | Medical treatment: ADs may release foreign exchange up to US$ 10000 for medical treatment abroad on the basis of recommendation of Medical Board constituted by the Health Directorate or on the basis of the need established through recommendation of appropriate medical specialists and the cost estimate from a foreign medical institution. Bonafide requirements in excess of US$ 10000 are accommodated by Bangladesh Bank on written request alongwith satisfactory documentation supporting the bonafides of the expenses. | ||
| 8.7 | Taking out/bringing in of Bangladesh Taka: Incoming/outgoing passengers may bring in/take out up to Taka 500 per person in Bangladesh currency. | ||
| 8.8 | Taking out/bringing in of personal jewellery: Incoming/outgoing adult female passengers may take out/bring in any quantity of personal jewellery worn on their person or as part of their personal baggage. | ||
| 9. | MISCELLANEOUS REMITTANCES | ||
| 9.1 | Remittance of membership fees: ADs may remit membership fees of foreign professional, scientific institutions and fees for application, registration, admission, examination (TOEFL, SAT etc.) in connection with admission into foreign educational institutions as per estimate of the concerned institution. | ||
| 9.2 | Evaluation and Visa Processing Fee: ADs may remit evaluation and visa processing fee on behalf of Bangladeshis desiring immigration to foreign countries, as per demand note of the foreign immigration authorities. | ||
| 9.3 | Visa fee: Intending travellers may send visa fees through ADs to the embassies of countries that do not have consular offices in Bangladesh. Consular/visa fees collected by foreign embassies in Bangladesh Taka may be remitted abroad by the ADs without prior approval of Bangladesh Bank. | ||
| 9.4 | Family maintenance: Remittance of moderate amounts of foreign exchange for maintenance abroad of family members (spouse, children, parents) of Bangladesh nationals are allowed by Bangladesh Bank, on written request supported by certificates from the Bangladesh mission in the concerned country. | ||
| 10. | COMMERCIAL REMITTANCES | ||
| Prior permission of Bangladesh Bank is not required by the ADs for: -opening back-to-back import LCs on account of manufacture-exporters for their input imports as per prescribed input-output coefficients; -issue of bank guarantee/performance bond on account of the merchandise exporters of Bangladesh in favour of foreign buyers; -remittance on account of short weight, quality claim, partial shipment etc. upto 10% of realised export proceeds. -payment of discount not exceeding 10% of the invoice value at the request of the exporter where foreign importers refuse to clear goods due to discrepant documents etc., -remittance of premia on foreign currency policies taken by Bangladesh nationals while residing abroad, -remittance of premia on account of re-insurance, -remittance of “General Average” collected from consignees in Bangladesh, -remittance of pre-shipment inspection fees, -remittance of bonafide expenses incurred by Bangladesh Biman and Bangladesh Shipping Corporation in foreign ports/stations, -remittance on account of charter hire of foreign ships, -remittance of purchase price of ships acquired by private firms/companies, -remittance of royalty/honoraria/fees to non-residents including foreign news agencies for features, articles etc. subscribed by local newspapers/magazines, -advertising of Bangladeshi commodities in mass media abroad. | |||
| 11. | HOTEL BILLS | ||
| Payment of hotel bills of foreign guests may be accepted in local currency. | |||
| 12. | OTHERS | ||
| - Funds from non-resident Taka accounts can be freely withdrawn regardless of the amounts involved. - Declaration in Form C is not required in case of remittances sent by Bangladesh nationals working abroad. However, persons other than Bangladesh nationals are required to declare in Form C if the inward remittance is US $ 2000 or above. | |||
| 13. | ACTIVATION OF FOREIGN EXCHANGE MARKET | ||
| Bangladesh Bank has taken the following steps to help stimulate/activate the interbank foreign exchange market: 1)Bangladesh Bank has stopped sales and purchases with ADs of any currency other than the US Dollar, to encourage interbank cross currency transactions. 2)To encourage inter-bank deals and to dissuade frequent recourse to transactions with the central bank, Bangladesh Bank has raised its transaction threshold to US$ 50,000 with values in multiples of US$ 10,000, for its deal with ADs. The exchange rates for the Bangladesh Bank's spot purchase and sales transactions of US Dollars with ADs is decided on a case to case basis, Bangladesh Bank does not undertake any forward transaction with ADs. The ADs are free to quote their own spot and forward exchange rates for inter-bank transactions and for transactions with non-bank customers. 3)To provide greater flexibility in the foreign exchange transactions of ADs, Bangladesh Bank has abolished their foreign exchange holding limits; they are, however, required to be within the open position limits prescribed by Bangladesh Bank in respect of exposure to exchange rate fluctuation risk. 4)Bangladesh Foreign Exchange Dealers Association (BAFEDA) has been formed and a “Code of Conduct” for treasury operations and interbank foreign exchange market has been formulated. 5) ADs have been allowed to maintain with Bangladesh Bank FC Clearing Accounts in Euro, Japanese Yen, as well as US Dollar & Pound Sterling. Source: http://www.bangladesh-bank.org | |||
