Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has relaxed regulations on forward sale and purchase of foreign exchange (forex) to facilitate hedging transactions, officials said.
Under the relaxations, customers are allowed to receive their exchange gains after closing forward deals. Earlier, exchange gains, if any, on cancellation were not passed on to customers.
Besides, non-deliverable forward (NDF) contracts will be facilitated to minimise exchange rate risk in the market.
Senior treasury officials, however, said it’s a new feather of forward deals that will help the clients, who have long-term hedging requirements.
Such relaxations will help foreign contractors or service providers to get an additional tool for hedging long-term forex risk exposures, they added.
The Bangladesh Bank (BB) officials hoped that would increase forward transactions in the forex market in the near future.
Under the flexibility, forward contracts may be renewed/rolled over/extended for new delivery period at the prevailing market rate, provided the authorized dealers (ADs) are satisfied with documentary evidences that the customers are unable to carry out the contracts due to changes in the actual requirements or other valid exigencies.
In such cases, when both cancellation and re-booking of forward contracts are undertaken simultaneously, gain to customers, if any thereon, to be passed on to them at the time of entering into new arrangement, according to a notification, issued recently by BB.
“Such gains favouring the customers will be retained in their margin accounts till the close of the underlying transactions,” it added.
The notification also said balances held in the accounts may be utilised by the ADs for realising dues from the customers for this purpose.
“It is permissible to book short-term NFD contracts with roll-over flexibility till maturity for ultimate settlement on deliverable basis against underlying transactions having long tenure,” it added.
The forward contracts booked under the facility are normally deliverable at maturity. Exchange gains, if any, on cancellation are not passed on to customers.
BBN/SSR/AD