Dhaka, Bangladesh (BBN) – The central bank has expedited its monitoring and supervision on off-shore banking units (OBUs) of the commercial banks after nearly 30 years of its inception in Bangladesh for minimising risks.
As part of the moves, the Bangladesh Bank (BB), the country’s central bank, is now collecting information on assets and liabilities of each OBU on weekly basis for assessing their risks.

Besides, the central bank has started preparations to bring the functions of OBUs under regular monitoring by amending the existing provisions on operation and establishment of the OBUs operations in Bangladesh.

The BB’s latest moves came against the backdrop of rising trend of loans and advances, provided by the OBUs in the recent years.

After opening up private sector credit from overseas sources, the demand for foreign currency loans from OBUs has been increased gradually, a BB senior official explained.

“The OBUs are now playing a significant role in the credit market following the higher demand for foreign loans mainly due to lower interest rate on such lending,” the central banker noted.

The BB has already started compiling and seeking more data from the OBUs to determine their actual exposure, which may be a ‘considerable amount’, the central banker hinted.

The BB earlier formed a six-member high-powered committee, headed by Chowdhury Md. Feroz Bin Alam, general manager of the Banking Regulation and Policy Department (BRPD) of BB, to submit a detail report on OBUs activities with their recommendations.

The committee has already finalised their initial report with recommendations after consultation with seven leading private commercial banks (PCBs).

The central bank of Bangladesh is going to form two committees shortly to examine possible liquidity risk of the banks for taking foreign currencies liability with their OBUs and to bring necessary changes or amend the existing provisions including reporting requirements in line with the committee’s recommendations.

Currently, 33 commercial banks out of 56 are ruing their around 50 OBUs across the country as per a directive, issued by the Banking Control Department of BB on December 17, 1985.

Two more private commercial banks (PCBs) have submitted applications to the central bank seeking OBU licenses, according to another BB official.

Under the directive, the OBUs have been allowed exemption from the purview of certain provisions of Banking Companies Ordinance, 1962 as per the government notification.

Besides, the OBUs will also be considered for exemption from Article 36(1) of Bangladesh Bank Order, 1972 on such term and for such period as may be deemed fit by the government.

It means the OBUs are exempted for maintaining CRR (cash reserve requirement) with the BB against their liabilities.

The OBUs are freed to accept deposits from outside Bangladesh and borrow abroad. They are also freed to make advances/investments abroad and also make permissible transactions with industries in the EPZs (Export Processing Zones).

“There would not be any restriction on the physical location of the OBUs. These may be located both the EPZs or any other convenient location outside, even existing branches of banks may be allowed to operate such units through a completely separate counter,” the BB had said in the directive.

BBN/SSR/AD-07June15-7:04am (BST)