Bangladesh withdraws interest rate ceiling for NFCD accounts to boost forex reserves

The central bank of Bangladesh on Sunday withdrew the interest rate ceiling on non-resident foreign currency deposits (NFCDs) in a bid to boost shrinking forex reserves. The Foreign Exchange Policy Department (FEPD) of Bangladesh Bank (BB) issued a circular on Sunday, saying that the instruction shall come into force with immediate effect in its letter to the authorized dealers (ADs) in Bangladesh, Xinhua reported. The Bangladesh Bank earlier asked banks to set the interest rate in line with the euro currency deposit rates followed by the lenders in the eurozone. In accordance with the BB instruction, commercial banks in Bangladesh have been offering interest rates ranging from 0.25 per cent to 0.80 per cent to the depositors.

Following the circulation, banks here are now allowed to avoid such ceiling to mobilize deposits from non-resident Bangladeshis, and Bangladesh-origin individuals, including those having dual nationality and residing abroad. BB last Thursday also reportedly instructed ADs to report all types of their foreign exchange transactions including offshore banking operations to the web portals of BB on a regular basis. The new measure is deemed to tighten policy on the spending of foreign exchange by curbing unnecessary imports and trade-based money laundering, reported Xinhua. Bangladesh's foreign exchange reserves last week fell below 40 billion U.S. dollars for the first time in two years, weighed by higher import bills and the taka's weakness driven by the dollar's broad surge in recent months. Bangladesh's forex reserves surpassed the 48-billion-dollar mark in August last year, the highest ever in history, due to a slowdown in imports and rising remittance and export earnings during the COVID-19 pandemic.