Bangladesh Bank’s new policy restricts onshore banks from providing fund support to offshore units, aiming to end such support by December 2024. Previously, banks could transfer up to 30% of their regulatory capital to offshore units, but the latest policy eliminates this option, prompting offshore units to rely solely on foreign sources. The move is expected to trigger a foreign currency crisis in offshore units, impacting trade-related activities like import financing and bill discounting. Offshore units, functioning as a separate banking system, currently hold around $6 billion from onshore banks, potentially leading to a temporary crisis. Critics argue that irregularities in some banks led to this sector-wide policy change, weakening offshore banking functions and raising concerns about import financing disruptions.
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