[🇧🇩] Banking System in Bangladesh

[Saif]

BB closely monitoring activities of reconstituted bank boards

Bangladesh Bank (BB) Governor Ahsan H Mansur on Thursday said the central bank is closely monitoring the activities of reconstituted bank boards and will intervene if necessary. He warned that unless stricter classification rules are introduced, non-performing loans (NPLs) could rise to 30 per cen

thefinancialexpress.com.bd

BB closely monitoring activities of reconstituted bank boards
FE REPORT
Published :
May 23, 2025 10:52
Updated :
May 23, 2025 10:52

Bangladesh Bank (BB) Governor Ahsan H Mansur on Thursday said the central bank is closely monitoring the activities of reconstituted bank boards and will intervene if necessary.

He warned that unless stricter classification rules are introduced, non-performing loans (NPLs) could rise to 30 per cent.

"We are going to change the classification rules and make them stricter," he said, adding that the central bank is planning fundamental reforms to the Bank Company Act.

Speaking at the 22nd Nurul Matin Memorial Lecture on Ethics in Banking, the governor said, "We are trying to introduce a provision that limits the number of board members from a single family to two and limiting their tenure as well."

The annual event was organised by the Bangladesh Institute of Bank Management (BIBM) on its campus.

Mr Mansur acknowledged that political support will be essential to implement the necessary banking sector reforms.

He criticised the previous regime for fostering a culture of unethical practices, which left the sector in poor shape. "We are trying to correct those wrongs," he said.

He also noted that restructuring weak banks would be a major challenge.

"Some may go into liquidation, and others may need to be merged," the governor said, adding that the central bank is considering appointing foreign experts to facilitate the process.

M Kabir Hassan, a finance professor in the Department of Economics and Finance at the University of New Orleans in the US, delivered the keynote lecture titled "Roots and Repercussions: Unravelling the Ethical Crisis in Bangladesh's Banking Sector."

He identified political interference, collusion, corruption, and weak governance as the key drivers of financial instability in Bangladesh's banking sector.

The professor cited major banking scandals - such as those involving BASIC Bank, Farmers Bank, Sonali Bank, and Islami Bank Bangladesh - to highlight unethical practices like politically influenced loan approvals, wilful defaults, and regulatory negligence.

"These failures have eroded public trust, destabilised the economy, and disproportionately affected small businesses and rural borrowers," he said.

He underscored the need for stronger penalties, independent anti-corruption watchdogs, and enhanced whistleblower protections to address the crisis.

Besides, the professor warned that the consequences of the banking sector's ethical failures include economic instability, reduced foreign investment, rising unemployment, inflationary pressure, and diminished public confidence.

BB Deputy Governor Nurun Nahar and BIBM Director General Dr Md Akhtaruzzaman also spoke at the event.​

 

[Saif]

Karmasangsthan Bank’s business development meeting held in Rangpur

Business Development Meeting-2025 was held on Friday at Begum Rokeya Auditorium, RDRS, Rangpur, with the participation of Regional Managers, Branch Managers and Second Officers of Rangpur and Dinajpur regions and Regional Managers, Branch Managers and Field Officers of Kurigram region of Karmasangs

thefinancialexpress.com.bd

Karmasangsthan Bank’s business development meeting held in Rangpur
FE ONLINE DESK
Published :
May 23, 2025 21:04
Updated :
May 23, 2025 21:04

Business Development Meeting-2025 was held on Friday at Begum Rokeya Auditorium, RDRS, Rangpur, with the participation of Regional Managers, Branch Managers and Second Officers of Rangpur and Dinajpur regions and Regional Managers, Branch Managers and Field Officers of Kurigram region of Karmasangsthan Bank.

Former Secretary and Chairman of the Board of Directors of Karmasangsthan Bank Dr. AFM Matiur Rahman attended as chief guest in the meeting. Managing Director Arun Kumar Chowdhury, General Manager of Audit Department of the Head Office Md. Amirul Islam were present as special guests, according to a press release.

The meeting was also attended by the DGM of Loan and Advance Department of the Karmasangsthan Bank Head Office Md. Moshiur Rahman, DGM of Loan Recovery Department, Md. Akhter Hossain Pradhan, and the DGM of the Branch Control Department, Monoj Roy. The meeting was presided over by the DGM of Rajshahi Divisional Office, Md. Mukhlesur Rahman.

In his speech, the Chief Guest advised everyone to distribute quality loans through proper customer selection. He also called on everyone to strive to achieve 100 per cent of the business targets in the remaining period of the fiscal year. He also advised everyone to work with honesty and integrity.

In his speech, the Managing Director emphasized on achieving 100 per cent loan disbursement and loan recovery as well as achieving the target of recovery rate against recoverable loans including defaulted loans, classified loans. Stating that the working days in the current fiscal year are very short, he advised to fill the deficit in all indicators through hard work in these few days.​

 

[Saif]

Reviving Bangladesh’s banking sector: A race against time for innovation and reform

Modern, reliable, technologically advanced banks might be the engines for Bangladesh's next development boom.

www.thedailystar.net

Reviving Bangladesh’s banking sector: A race against time for innovation and reform

FILE VISUAL: SHAIKH SULTANA JAHAN BADHON

Once a foundation of economic development, Bangladesh's banking industry is on the verge of becoming its Achilles heel. Crushing non-performing loans (NPLs), poor governance, and stagnant innovation undermine confidence, limit credit expansion, and threaten financial stability. If dramatic changes are not sought, the country may lose one of its main tools for maintaining long-term economic development.

Per the Bangladesh Bank data, NPLs constituted 20.20 percent of all outstanding loans by the end of 2024—well over the safe level of five percent, as advised by the International Monetary Fund (IMF). By June this year, the ratio is likely to rise to 30 percent, the central bank says. Although they own less than 30 percent of the banking assets, state-owned commercial banks are responsible for more than 45 percent of problematic loans. Unresolved vulnerabilities might reduce Bangladesh's GDP growth, compromising its aim for upper-middle-income status, according to the 2025 report of the World Bank.

Still, this approaching disaster is not unavoidable. It results from choices; better choices are still within reach if they are based on innovation and effective governance.

Bangladesh's banking system has historically depended on politically driven credit distribution and branch-based business lending. This model has now reached its limits. Less than 25 percent of Bangladeshi adults now have official credit access (The World Bank's Global Findex Database, 2021). As of December 2024, nearly 24 crore mobile financial service (MFS) accounts run outside the official banking network, according to the Bangladesh Bank.

The private sector, particularly SMEs, is hungry for reasonably priced capital. Stunting business and job growth, a 2023 IFC estimation projects a $2.8 billion MSME finance shortfall in Bangladesh. Simultaneously, poor loan allocation to large but high-risk borrowers is ballooning NPLs and severely damaging the banks' balance sheets. Following business as usual in this environment is useless and harmful.

While Bangladesh's financial administration deteriorated, a worldwide technology revolution was underway. At an unprecedented pace, mobile banking, AI-driven lending, blockchain trade finance, and open banking ecosystems are transforming financial institutions.

Between 2018 and 2022, branchless banking projects provided financial access to 60 million additional clients in Indonesia (World Bank, 2023). Mobile-first microloans under M-PESA expanded SME lending by 24 percent in Kenya over four years (GSMA, 2022). Bangladesh lags in this regard, despite the GSMA's projection (2022) of 63 percent smartphone penetration by 2025. Should banks neglect to adapt, they risk becoming irrelevant to the next generation of companies and customers. The danger is not theoretical; fintech sites already help millions of people who now find conventional banks sluggish, expensive, and inaccessible. Technology should help digitise current services and allow new goods to fit the changing market.

Three factors stand out as interesting:

* Microloans coupled with mobile wallets serve the informal and low-income sectors now left out of official financing.

* Supply chain financing helps SMEs, especially in the RMG and agricultural sectors, by unlocking liquidity for manufacturers and exporters.

* Green finance products encourage the acceptance of renewable energy sources, whereby worldwide investors are progressively channelling funds.

Banks that entered digital microcredit, embedded finance, and green lending enjoyed double-digit asset growth and decreased default rates globally (McKinsey Banking Review, 2023). The first banks to aggressively enter these products might restore Bangladesh's importance and profitability.

Still, without a hard reset in governance, technology and goods alone cannot save the industry.

The banking industry in Bangladesh is defined by weak risk controls, politicalised board nominations, and regulatory forbearance. These elements undermine depositors' trust, conceal big defaulters, and drive bad credit choices.

The reform package presented by the World Bank provides an unambiguous guide:

* Bank resolution frameworks should be improved.

* Stiffer deposit protection should be enforced.

* Expert, non-political board appointments should be specified.

* Specialist asset management companies (AMCs) should be launched to clean up NPLs methodically.

* Bankruptcy rules should be updated to hasten healing.

Vietnam provides a clear lesson: It reduced its NPL levels within five years after robust banking reforms in 2011 and revived private sector credit growth. Bangladesh has to be similarly politically courageous. Without governance improvement, no amount of digital innovation can reestablish public confidence—the lifeblood of banking.

Policymakers must build a regulatory climate that speeds up financial innovation beyond their own reform. It could include:

* Open banking in 24 months: letting clients safely communicate financial data encourages innovation and competitiveness.

* Starting a national fintech sandbox: allowing deliberate exploration driven by controlled testing of new digital items.

Bangladeshi banks now spend less than 0.1 percent of their revenue on cybersecurity, exposing systematic vulnerabilities (Deloitte, 2023). Early adopters of these models, like Singapore, India, and the UK, now find better, more inclusive banking environments. Bangladesh must act now or risk always falling behind its neighbours. Inaction comes at a very high cost. Every year of delay risks compounding NPLs, reducing SME access to capital, and increasing economic marginalisation. The societal fallout from lost employment, failed enterprises, and dashed hopes will eventually overwhelm the obvious financial issues of today.

Still, the benefits of action are great. Modern, reliable, technologically advanced banks might be the engines for Bangladesh's next development boom, fuelling investment, increasing inclusivity, and enabling entrepreneurship. The route chart is straightforward. The technology is available here. The institutional changes have had results. Only political will now separates Bangladesh's banking sector from renewal or irreversible decline. The time for hesitation is over.

Mamun Rashid, an economic analyst, is chairman at Financial Excellence Ltd and founding managing partner of PwC Bangladesh. He has served in senior roles at three global banks: ANZ, Standard Chartered, and Citibank, N.A.​

 

[Saif]

Legal amendments ready for BB autonomy: Governor

Necessary legal amendments are soon for central bank's autonomy and also for downsizing commercial banks' directorships under sweeping reforms that also envisage nationalisation of incurably ailing banks. Bangladesh Bank Governor Dr Ahsan H. Mansur unveils this plan of action in an exclusi

thefinancialexpress.com.bd

Six ailing banks destined for nationalisation
Legal amendments ready for BB autonomy: Governor
Number of directors, family directors to be curtailed, with shorter tenures

JUBAIR HASAN
Published :
May 27, 2025 00:51
Updated :
May 27, 2025 00:51

Necessary legal amendments are soon for central bank's autonomy and also for downsizing commercial banks' directorships under sweeping reforms that also envisage nationalisation of incurably ailing banks.

Bangladesh Bank Governor Dr Ahsan H. Mansur unveils this plan of action in an exclusive interview with The Financial Express (FE), dwelling at length on other far-reaching recast of the country's banking sector.

He said the central bank will start the process of nationalising six ailing commercial banks from July-August next under provisions of the recently introduced Bank Resolution Ordinance.

As part of the revival of the severely liquidity-crisis-ridden commercial lenders, the BB has already done asset-quality review and preview of different scenarios regarding the matching of the banks before official launch of the process of mergers and acquisitions of the problem banks.

Riding on direct cash-support by the banking regulator under the current interim government, the BB governor said, Islami Bank Bangladesh and United Commercial Bank have started rebounding well despite a significant portion of their balance sheets having been emptied through money laundering.

"I must give credit to the current management and their clients who did not lose their trust on the banks and returns. These two banks have come out of the problem and starts operating without any further support from the central bank after the initial feeding," he adds.

But liquidity crisis in most of the remaining banks is severe. There are banks where 87 per cent of the assets have been taken away during the Sheikh Hasina regime.

"How it is possible to do 100-percent servicing with 13-percent assets. No calculation will match it," Mr. Mansur, who took charge of the central bank leadership soon after the July-August mass uprising that toppled the Hasina government in 2024, says about the arithmetic of the banking mismatches.

To solve the problem and ensure full protection of the depositors in these banks, he noted, the regulator will come to intervene and nationalise them under the recently introduced Bank Resolution Ordinance which gives the central bank enough authority to place the incurable banks under state ownership as an ultimate cure.

Responding to a question, the central bank governor said they would start to apply the ordinance from July-August next on the green signal from the reigning interim government.

"We'll move forward for merger-acquisition or recapitalisation. But there is nothing to be worried. The banks will be revitalised through nationalisation to give further relief to the depositors."

He mentions that the Shariah-based banks, apart from Islami Bank Bangladesh, will be merged to form two large Islamic banks as part of sweeping reforms in the financial sector and they will bring potential investors as well.

When his attention was drawn to the unfruitful merger and acquisition moves taken by immediate-past governor Abdur Rouf Talukder under the Awami League regime, the governor said it was a miss-managed effort. There was no legal basis and power of the regulator to do so.

During that time, he recounts, the central bank used to fix who will merge with whom without doing proper asset review. "But we have completed asset-quality review of the banks. We know the value of the assets. We also make various scenario developments of the matching."

On the other hand, they have hired leading global consulting firms having enough experience of mergers and acquisitions and they will guide the regulator in structured way to do the critical tasks.

At the same time, the BB governor says, they are going to bring about major changes in the existing Bank Company Act as part of the ongoing reforms to ensure good governance in the financial sector.

The number of directors will be reduced. Family directorship in the banks will be curtailed to two in place of five and their tenure will be three years in each of two terms.

Now a family director can stay on the bank board twelve years in a row, according to the latest Bank Company Act amended in 2023.

"And 50 per cent of the directors must be independent and independent directors will be chosen from the BB's panel. You cannot appoint anyone you want," he further explains the recast plans.

However, if someone wants to nominate somebody from outside the panel and the nominated person is qualified and respectable, the central bank will approve it.

They will place the draft of the proposed amendment to the Bank Company Act to the chief adviser in July for securing the go-ahead.

Regarding independent functioning of the banking-regulatory body, Mr Mansur says they want to ensure autonomy of the central bank. As part of it, they will go for necessary revision of the Bangladesh Bank Order 1972.

He made it clear that every central bank of the world faces political pressure. Because of the fact, each developed country has put enough safeguards in place to overcome such external pressure.

"I can boldly say there is no external pressure on me. But those who will come later may face external pressure once the political government takes charge. Keeping this in mind, we want to bring reforms in the BB Order so that we can prevent the political pressure as an institution."

"We want to incorporate international best practices into the law and the draft is almost ready. It will also be discussed with the chief adviser in July", he said

Regarding the challenges of leaving the exchange rate to the market, the BB boss said many people feared the exchange rate would reach Tk 150 per dollar in the free-float regime but it didn't.

The central bank recently moved towards the market-centric regime and the exchange rate remained stable and hopefully it would remain so.

If anyone wants to destabilise the foreign-exchange market, the governor warns, they will be dealt with strictly. "There is enough supply of forex in the market thanks to a record inflow of remittance and steady export growth. Let the market go by its own force."

About the role of aggregators, he says they have to take the risk of leaving the exchange rate to be determined by the market. "The aggregators can quote any price they want but I won't buy. How many days they can hold dollars…maximum five working days. Because they will need taka to buy dollars, and for this, they will have to sell dollars."

There is no such vulnerability in the economy that will be able to pay external payments for seven days, even for a month. "Don't hope for gaining big margin like Tk 5 and Tk 10 a dollar. That will not happen," he tells possible dollar hoarders.

About central bank intervention in combating possible exchange-rate distortion, the governor says they kept an intervention fund of $500 million under the IMF lending programme and they don't want to use a single penny from the fund.

"The fund is like a sword and shield for us. I am ready to fight, but I don't want any war. I want peace. Don't force me to do so," he alerts.

Regarding inflation control, the governor felt that exchange-rate stabilisation is very vital in terms of cooling down inflationary pressure. The inflation keeps falling in recent months although it has not been brought down to the target yet.

"Our target is to bring down within 8.0 per cent by June next and below 7.0 per cent by August. I think we are in right direction," the BB governor maintains.​

 

[Saif]

OFC as a strategic monetary policy tool

Bangladesh, which is close to important south and southeast Asian markets, is a potential location for setting up a an Offshore Financial/Business Centre (OFC/OBC). With the interim government announcing a plan to establish a Free Trade Zone (FTZ) and attract global investment, the country is poise

thefinancialexpress.com.bd

OFC as a strategic monetary policy tool
Is it feasible in Bangladesh?

Md Saidul Islam
Published :
May 25, 2025 23:59
Updated :
May 26, 2025 00:09

Bangladesh, which is close to important south and southeast Asian markets, is a potential location for setting up a an Offshore Financial/Business Centre (OFC/OBC). With the interim government announcing a plan to establish a Free Trade Zone (FTZ) and attract global investment, the country is poised for an important shift in its financial landscape. Examining the feasibility of setting up an OFC/OBC in Bangladesh is necessary in this connection. The use of it as a monetary policy tool as well as economic facilitator may also be examined.

In the April 2025 Investment Summit, DP World Chairman expressed interest in investing the country after meeting with Chief Advisor Prof Muhammad Yunus. It offered Bangladesh’s FTZ plan a promising boost. In line with successful models like the Jebel Ali Free Zone in the United Arab Emirates (UAE), a national committee has been established, signifying progress towards a globally interconnected offshore financial centre.

With the OBU Act-2024, facilitated by FF Circular 11 (January 30, 2025) of Bangladesh Bank, the country has made a major institutional shift by enacting its first law to regulate offshore banking after 38 years despite the fact that it is a commercial bank’s banking unit or desk. Investor confidence is, however, dependent on more comprehensive system-wide reforms, such as the setting up OFCs or OBCs.

OFC decoded: The term ‘offshore’ refers to a geographical location outside of one’s home country. It is mostly used in the banking and financial sectors to describe ‘areas where regulations are different from the home country.’ It, however, means that an ‘offshore jurisdiction’ of ‘offshore centre’ may be located within a country although regulated differently.

Generally, the term ‘offshore financial centre’ of OFC is used for any country or a jurisdiction with financial centres comprising of financial institutions that deal primarily with non-residents and/or in foreign currency on a scale out of proportion to the size of the host economy. In other words, non-resident owned or controlled institutions play a vital role within such financial centres. The International Monetary Fund (IMF) in 2007, offered a definition of OFCs: “An OFC is a country or jurisdiction that provides financial services to non-residents on a scale that is incommensurate with the size and financing of its domestic economy.” Despite some limitations, the IMF definition is widely accepted across the world.

Globally, OFCs such as the Cayman Islands, Singapore, Hong Kong, Malaysia, Mauritius and Luxembourg are important in determining economic and financial outcomes by virtue of their ability to facilitate capital flows, enhance currency liquidity, and provide alternative financing windows. The significance of such viewpoints is now increasing for Bangladesh as it endeavours to strengthen its monetary and financial systems in the face of changing global dynamics.

In order to attract foreign direct investment (FDI), maintain currency stability, and establish connections with global financial markets, Singapore, Dubai, and India’s GIFT City have all effectively used offshore centres.

Following the global practice, Bangladesh may actively consider establishing an OFC or OBC which will be able to manage money, enhance net foreign assets, and help maintain price and economic stability by stabilising the local currency. OFC will target the benchmark interest rate on foreign currencies, and manage liquidity inflows and outflows to protect against inflation and currency shocks. This calculated action may bring a new opportunity for financial integration as well as indirect monetary policy intervention through increased regulatory innovation, liquidity management, and capital inflows.

However, it also raises concerns about capital flight, money laundering, and regulatory flaws that could jeopardise Bangladesh’s financial system’s stabilisation. OFCs are well known for ‘hiding tax liabilities or ill-gotten gains from authorities’. In this connection, the establishment of a strong regulatory framework, meticulous risk management protocols, and international collaboration are necessary for the effective implementation of OFCs in Bangladesh.

AS a stratigic monetary tool: Traditionally, central banks use tools such as interest rate adjustments, open market transactions, and reserve requirements to regulate the money supply to contain inflation and maintain macroeconomic stability. In a globalised financial system, offshore financial centres provide supplementary, market-driven processes that affect monetary dynamics through private sector contacts and cross-border finance.

The offshore jurisdiction usually has minimal or no taxation, and provide regulation and legal frameworks promoting international financial transactions with less transparency. Several studies ((Blinder, A. S., 2008 and Hutchison, M. M., 2009) show that a non-convertible offshore financial centre offers extensive financial services, low tax rates, and appeals to foreign investors. So, the centre may influence monetary policy by directly effecting capital flows and liquidity management on the Financial Account. Funds channelled through OFC may have zero effect on money supply. It is hypothetically illustrated in Table-1.

On the other hand, a fully convertible offshore financial centre may facilitate total currency convertibility and encourage unfettered capital movement, potentially impacting exchange rates and monetary stability and directly affecting the current account.

Bangladesh can consider an OFC/OBC as a strategic monetary policy tool rather than a comprehensive liberalisation strategy. It could establish a unique offshore financial hub focused on enhancing connectivity within South Asia and ASEAN, attracting Islamic finance, green bonds, and technological investments, while enhancing monetary and financial sovereignty through diversification. Bangladesh can incorporate its new banking regulations into a comprehensive offshore financial centre or offshore business centre structure.

How it MAY work: In contrast to more conventional methods like interest rates, reserve requirements, or open market operations, which Bangladesh Bank currently uses, OFC can act as an indirect but effective monetary policy tools. OFC usually works by influencing the larger financial environment through international capital flows, foreign currency liquidity, and offshore borrowing/lending regimes, whereas traditional instruments directly affect liquidity and inflation through local banking processes.

OFCs influence the money supply through mechanisms such as currency swaps, offshore deposits, and capital repatriation, which contrast with the central bank’s regulated domestic operations. For example, Offshore Banking Units (OBUs) in Bangladesh efficiently increase the available credit base and money supply by using up to 30 per cent of their regulatory capital from Domestic Banking Units (DBUs). This is accomplished through market-based offshore operations and is comparable to the multiplier effect that is typically connected with central bank initiatives.

In addition, OFCs draw FDI and remittances, and offer a platform for foreign currency management and hedging. All of these have an impact on local liquidity and the exchange rate. OFCs bring dynamic, market-responsive mechanisms that interact with global capital markets, either enhancing or reducing domestic monetary trends, in contrast to the static character of conventional methods. As a result, even though OFC is not considered standard monetary tools, its growing function in controlling liquidity, maintaining exchange rate stability, and affecting credit availability makes them complementary and strategically important monetary policy tool in a networked financial system.

By using global capital flows to affect important macroeconomic factors including liquidity, interest rates, currency rates, and the money supply, the establishment of an OFC can be a strategic addition to a nation’s monetary policy toolkit. OFCs function through the architecture of global finance, facilitating cross-border investment, enabling risk management, and luring foreign capital under advantageous regulatory and tax regimes, in contrast to traditional instruments like interest rate adjustments or open market operations.

OFCs also provide liquidity to the domestic financial system by attracting foreign capital inflows through tax breaks and regulatory latitude, which can reduce interest rates and boost the economy. On the other hand, they can also direct domestic money abroad in pursuit of risk diversification or higher rates, which could affect local liquidity and lead to central bank action to preserve monetary stability. Thus, OFCs serve as both channels and buffers, affecting the domestic money supply in accordance with the more general objectives of monetary policy.

Additionally, by providing alternate channels for capital allocation and investment, OFCs lower domestic financial volatility, promote financial innovation, and offer tools for hedging and diversification. Additionally, they provide as venues for regulatory arbitrage, which, when properly controlled, can enhance domestic laws by providing flexibility without jeopardising systemic stability. Well-regulated OFCs can strengthen creditworthiness, draw in long-term investment, and assist the central bank in better managing inflation, exchange rate pressures, and economic shocks when they are closely linked with a nation’s monetary governance. Therefore, OFCs are more than just offshore financial havens; they may also serve as sophisticated enhancers of monetary policy, offering leverage and flexibility in a financial system that is becoming more interconnected by the day.

In order to maintain price stability and economic expansion, Bangladesh Bank controls the money supply through the use of instruments such as interest rates, reserve requirements, and open market operations. With foreign reserves of about $21 billion, broad money (M2) is valued at Tk 17 trillion as of 2024. Due to changes in capital allocation, Bangladeshis’ offshore assets decreased from $8.145 billion in 2021 to $5.91 billion in 2022. Liquidity and foreign exchange availability are impacted by the Tk 83,826 crore ($9.5 billion) in loans held by offshore banking units (OBUs). Maintaining Bangladesh’s macroeconomic stability still depends on effective monetary policy that is in line with controlling both domestic and foreign financial flows.

Variety of instruments: A wide variety of financial instruments that are essential for international liquidity and capital mobility are traded by offshore banking and financial centres. These consist of commodities futures, money market instruments, hedge funds, private equity, and foreign exchange. Centres for SBLC monetisation, trade financing, collateral transfers, and international guarantees include the Cayman Islands, Singapore, and Hong Kong because they provide regulatory simplicity and tax neutrality. These products have a major impact on financial flows, encourage investment, and stabilise markets in both host and participant nations by promoting risk management, improving liquidity, and drawing in international capital.

So, Bangladesh may consider setting-up strategically placed integrated offshore zones like Matarbari, Moheshkhali, Sabrang (Marine Drive), and the Northern Special Economic Zone (NSEZ) in order to optimise the advantages of OFCs or OBCs. By providing competitive tax holidays, regulatory flexibility, and streamlined processes in line with international OFC best practices, these zones can serve as pilots for OFC operations. To ensure the integrity and security of offshore transactions, a strong legal and compliance framework must be established, especially to implement the Countering the Financing of Terrorism (CFT) and Anti-Money Laundering (AML) standards.

OFCs and OBCs should support capital inflows, financial instrument diversity, and Taka stability in line with Bangladesh’s larger monetary policy objectives in order to increase macroeconomic resilience. Furthermore, if Shariah-compliant, there is an opportunity for OFC to open an investment window of the Islamic banks in the country.

End note: In the real word, to what extent a full-fledged OFC can perform as a strategic monetary tool is a matter of thorough study backed by empirical evidences. For Bangladesh, it is a new concept and requires further examination. The experiences of the country’s OBUs, however, indicate that the policymakers need to look into the matter and seriously consider setting up an OFC in Bangladesh.

Md Saidul Islam CDCS is First Vice President and Head of OBU

The Premier Bank PLC, Gulshan Branch.​