Bangladesh Bank Allows Offshore Banking Units To Trade Forex More Freely

💰 Bangladesh Bank has expanded the scope of foreign currency operations that offshore banking units (OBUs) can undertake, allowing them to directly buy and sell foreign currencies and enter into cross-currency swap agreements. In a circular issued today, the central bank said the move aims to facilitate legitimate customer transactions, improve foreign currency liquidity management, strengthen banks' management of assets and liabilities, and bring offshore banking operations in line with international treasury practices.

📊 Under the new framework, OBUs can directly buy and sell foreign currencies and enter into cross-currency swap agreements with their Domestic Banking Units (DBUs), other Authorised Dealers (ADs), other OBUs and legitimate foreign entities. A cross-currency swap allows two parties to exchange payments in different currencies, helping banks manage the risk of changes in exchange rates. According to the circular, OBUs can carry out these transactions when they are linked to customer transactions, payment obligations, funding requirements, foreign currency liquidity management or the management of risks on their balance sheets.

• 🏛 New authority: OBUs (Offshore Banking Units)
• 💰 Permitted: Buy/sell forex + cross-currency swaps
• 👥> Counterparties: DBUs, ADs, other OBUs, foreign entities
• 📜> Purpose: Customer transactions, liquidity management, risk management
• 🌏> Alignment: International treasury practices

📜 Prudent Funding Strategy

The central bank also instructed OBUs to follow prudent funding strategies. It encouraged them to use lower-cost sources of funds and cross-currency swaps to reduce the risks arising from exchange rate movements. The wider range of treasury transactions will give OBUs more flexibility in managing their funding and foreign currency exposure. It could also help reduce their borrowing costs and support cheaper financing for eligible trade activities.

🌏 Strategic Context: Trade Finance And Forex Management

OBUs are specialised banking units that handle transactions mainly in foreign currencies. In Bangladesh, they operate under separate offshore banking rules and can support international trade and other foreign currency transactions. The expanded scope could help OBUs manage foreign currency liquidity more efficiently and provide greater support to businesses involved in international trade.

For Bangladesh's export-oriented economy, the expanded OBU forex authority carries meaningful strategic significance. Bangladesh's RMG sector — which generates over $48 billion in annual exports — depends on efficient trade finance and forex management for LC settlement, export bill discounting and working capital management. By allowing OBUs to trade forex more freely and enter cross-currency swaps, Bangladesh Bank is enabling more efficient foreign currency management that could reduce the cost of trade finance for export-oriented businesses.

The alignment with international treasury practices is also important. As Bangladesh prepares for LDC graduation in November 2026, the country's banking sector needs to demonstrate compliance with international standards — including the treasury management capabilities that global banks and correspondent banking partners expect. The expanded OBU authority brings Bangladesh's offshore banking framework closer to the standards that international financial institutions apply when assessing banking sector modernisation.

The coming months will reveal whether the expanded OBU authority translates into more efficient forex management and reduced trade finance costs — or whether the regulatory liberalisation creates risks that require additional supervisory oversight to manage. For Bangladesh's banking sector modernisation agenda, the OBU reform represents a meaningful step toward aligning domestic banking practices with international treasury standards.