Bangladesh Bank on Thursday authorised banks to issue bid bond and performance bond in foreign and local currency on behalf of non-resident firms or companies in favour of concerned authorities in Bangladesh against foreign back to bank guarantee acceptable to them.
The central bank issued a circular in this regard with immediate effect giving exemption to the scheduled banks from taking prior approval from the central bank before issuing such guarantees.
According to the BB circular issued by its deputy general manager Md Enamul Karim Khan, the scheduled banks, however, will have to hold a back-to-back guarantee from an overseas correspondent or overseas other bank covering the guaranteed amount for issuing such bid bond and performance bond.
Besides that, the banks must be satisfied with the legitimate arrangements against the specified purposes for which foreign counterparts are liable to arrange back-to-back guarantee with risk, it said.
In case of giving guarantee in local currency against back-to-back guarantee in foreign currency, the banks must ensure coverage for exchange rate fluctuation from counter guarantee issuing banks abroad.
The banks must also carry out due diligence with regards to KYC (know your client) and other standards about the transactions, the BB circular said.
Officials of the central bank said that the scheduled banks were empowered to give such guarantees as the central bank had become overloaded with applications from the banks for approval in this connection.
A rapid growth in the government’s foreign procurement was among the other reasons for the increase in the number of applications for such approval, they said.
The officials, however, said that the other applicable rules and regulations in this connection would remain unchanged.
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