GUIDELINES FOR FOREIGN EXCHANGE TRANSACTIONS

1 BANGLADESH BANKGUIDELINES FOR FOREIGNEXCHANGE TRANSACTIONSV olume- 1 SUMMARISINGI nstructions as of 31 May, 2009 issued toAuthorised Dealers and Money Changers in FOREIGN ExchangeTo be read in conjunction with other instructions, subsequentamendments and modifications issued from time to PrefaceThis publication, titled ' GUIDELINES for FOREIGN EXCHANGE TRANSACTIONS ' is the successor to the last (1996) edition of the same. This is a compilation of the instructions to be followed by the Authorised Dealers & their constituents, Money Changers in TRANSACTIONS relating to FOREIGN EXCHANGE . These GUIDELINES come in two volumes. The first volume includes the instructions and the prescribed forms/declarations relating to individual TRANSACTIONS .

2 The second volume delineates the procedure of reporting of FOREIGN EXCHANGE TRANSACTIONS by Authorised Dealers to Bangladesh Bank, and includes the proformas for monthly returns, statements, schedules for such reporting. Both volumes include instructions as on the 31 May, 2009 and should be read with FE Circulars/Circular Letters issued EXCHANGE Policy Department Bangladesh Bank Head Office, , Introduction and Authorised Dealers and Money for Money Changers ..53 Bangladesh Bank's TRANSACTIONS with 84 FOREIGN Currency Accounts of the ADs and Purchase and Sale ofForeign Currency ..10 Forward Dealings in FOREIGN EXCHANGE ..12 Hedging the Price Risk of Commodities ..14 Non-Resident Taka Accounts of FOREIGN Bank Branches and Correspondents.

3 155 Outward Remittances ..16 Inward Remittances ..18 Dealings in FOREIGN Currency Notes and Coins Etc..196 Import and Export of Currency Notes and Coins, FOREIGN EXCHANGE , Gold, Silver, Jewellery and Securities Etc..217 Imports ..26 Letters of Credit and Remittances against Imports ..32 Back to Back LCs ..38 Deposit of Counterpart Fund in respect of Imports under Non Project Commodity Loans/Credits/Grants ..418 Exports .. 44 Exports from the Export Processing Zones ..579 FOREIGN Investment in Bangladesh ..58 Operations in Securities ..6110 Commercial Remittances (Other than for Imports) ..6311 Private Remittances ..9012 Travel ..10013 Private FOREIGN Currency Accounts ..114 Non-Resident FOREIGN Currency Deposit Accounts ..119 Resident FOREIGN Currency Deposit 's Retention Quota Accounts.

4 123 FOREIGN Currency Accounts for the EPZ Companies .. 12514 Convertible and Non-convertible Taka Accounts ..126 Private Non-Resident Taka Accounts ..127 Non-Resident Blocked Taka Accounts ..133 Non-Resident Investor's Taka Accounts (NITA) ..13515 Borrowing Abroad by Residents ..13716 Loans, Overdrafts and Guarantees ..139 Credit Facilities to Industries in Export Processing Opening of Office and Appointment of Agents in Bangladesh byNon-Residents: Repatriation of Earnings of Commission, Fees Etc..14918 Insurance Business ..152 Reinsurance ..15619 Payment Through International Cards ..157 CONTENTSCHAPTERPAGESAPPENDICESF oreign EXCHANGE Regulation Act, 1947 (VII of 1947).Notifications Issued by the Government of the People's Republic of Bangladesh and the erstwhile Government of pakistan under FOREIGN EXCHANGE Regulation Act, 1947 (VII of 1947).

5 Notifications Issued by the Bangladesh Bank and the erstwhile State Bank of pakistan under FOREIGN EXCHANGE Regulation Act, 1947 (VII of 1947).List of Bangladesh Bank's Offices and their Forms of Applications, Declaration, etc. other than Periodic Returns & Notification Issued by the Board of Investment for Obtaining Loan from Abroad by Industrial Enterprises in Bangladesh in the Private Policy GUIDELINES for Establishment of Drawing Arrangement between the EXCHANGE Houses Abroad and the Banks Operating in List of Required Information/Documents for seeking Permission to Act under Section 18A & 18B of FOREIGN EXCHANGE Regulation Act, GUIDELINES to be Followed to Act as an Agent (as Satellite Channel Distributor) of FOREIGN Principal(s) under Section 18A of FOREIGN EXCHANGE Regulation Act, 5 (1-89)APPENDIX 6 (1-4)CHAPTER 1 INTRODUCTION AND DEFINITIONS1.

6 FOREIGN EXCHANGE Regulation (FER) Act, 1947 (Act No. VII of 1947) enacted on 11th March, 1947 in the then British India provides the legal basis for regulating certain payments, dealings in FOREIGN EXCHANGE and securities and the import and export of currency and bullion. This Act was first adapted in pakistan and then in Bangladesh. The Act is reproduced at Appendix 1. Bangladesh Bank is responsible for administration of regulations under the Act. Appendix 4 provides a list of Bangladesh Bank's offices and their Basic regulations under the FER Act are issued by the Government as well as by the Bangladesh Bank in the form of Notifications which are published in the Bangladesh Gazette. Notifications issued by the Bangladesh Government and the erstwhile Government of pakistan and the Bangladesh Bank and the erstwhile State Bank of pakistan are reproduced at Appendices 2 and 3.

7 Directions having general application are issued by the Bangladesh Bank in the form of notifications, FE ( FOREIGN EXCHANGE ) circulars, SPA circulars and circular Authorised Dealers (ADs) in FOREIGN EXCHANGE are required to bring the FOREIGN EXCHANGE regulations to the notice of their customers in their day-to-day dealings and to ensure compliance with the regulations by such customers. The ADs should report to the Bangladesh Bank any attempt, direct or indirect, of evasion of the provisions of the Act, or any rules, orders or directions issued The ADs must maintain adequate and proper records of all FOREIGN EXCHANGE TRANSACTIONS and furnish such particulars in the prescribed returns for submission to the Bangladesh Bank.

8 They should continue to preserve the records for a reasonable period for ready reference as also for inspection, if necessary, by Bangladesh Bank's This publication summarises the instructions issued under the FER Act as well as the prudential instructions issued by Bangladesh Bank (as of 31 May, 2009) to be followed by ADs and Money Changers in their day-to-day FOREIGN EXCHANGE 116. Specimen forms (other than those of periodical returns dealt with in Volume-2) prescribed in this publication are given in Appendix- 5, while Appendix- 6 contains (i) Notification issued by the Board of Investment for obtaining loan from abroad by industrial enterprises in Bangladesh in the private sector (ii) Policy GUIDELINES for establishment of Drawing Arrangement between the EXCHANGE Houses abroad and Banks operating in Bangladesh (iii) List of required information/documents for seeking permission to act under section 18A and 18B of FOREIGN EXCHANGE Regulation Act, 1947 and (iv) GUIDELINES to be followed to act as an agent (as Satellite Channel Distributor) of FOREIGN principal(s)

9 Under section 18A of FOREIGN EXCHANGE Regulation Act, 1947. 7. Terms having a special meaning for the purpose of the FER Act are defined under Section 2 of the Act. However, for the purpose of this publication and the instructions issued by the Bangladesh Bank from time to time, the following terms as defined below shall be used in addition to those defined under Section 2 of the FER Act, 1947.(i) Resident and Non-ResidentSection 20(1) of FOREIGN EXCHANGE Regulation Act, 1947 stipulates that any person who has at any time after the commencement of the Act been resident in Bangladesh be treated as resident in Bangladesh until Bangladesh Bank by general or special order directs otherwise. Where such directions are given, the Act also empowers Bangladesh Bank, to declare the territory in which such persons be treated as resident.

10 Section 20 of the said Act as a whole delineates the authority to Bangladesh Bank with respect to resident status of any person, firm, bank, corporate body etc. and treatment of TRANSACTIONS by different kind of entities. For the purpose of the said Act, ordinarily, a resident is a person, bank or firm who/which resides/has established a place of business in Bangladesh. A person is deemed to be ordinarily resident if he maintains a home in Bangladesh or resides in the country for a substantial part of each year or pays income tax as a resident of Bangladesh. In addition to that (i) in terms of Section 5 of Article II of the schedules appended to the United Nation (Privileges and Immunities) Act, 1948, the accounts of United Nations and its Organisations, (ii) persons holding Office in the Service of the Republic of Bangladesh who go abroad or who are already abroad and residing outside Bangladesh for the time being either on duty or on leave, (iii) FOREIGN nationals residing in Bangladesh for work or self employment, (iv) FOREIGN nationals residing in Bangladesh for studyCH 12under student visa, (v) FOREIGN nationals staying in Bangladesh with residence visa, (vi)