Non-residents will no longer have to secure the Bangladesh Bank’s approval to invest up to Tk1 million ($8,201) in any public or private institutions within the country, except for the capital market listed ones.
The Bangladesh Bank, in a circular issued today, instructed all authorised dealer banks to comply with it.
Officials at the central bank say the exemption is to facilitate small foreign investments. However, investments above Tk10 lakh must secure approval from the Bangladesh Bank.
However, in the case of an investment below Tk1 million by a foreign investor in a Bangladeshi company in exchange for shares, the assistant directors (ADs) of the Bangladesh Bank will check the necessary documents.
Although the central bank’s approval is not mandatory in this regard, the relevant bank will keep a copy of the client’s (investor) application, and send it to the central bank and the client in a prescribed format, says the circular.
Shares can be issued against foreign exchange brought in from abroad only through the banking channel before the issuance.
ADs will ensure from relevant documents that the purpose of the foreign exchange, or remittance, is an equity investment, under which banks and clients will preserve encashment certificates, the circular adds.
In addition, the resident’s status of the shareholders and source country of funds shall be ensured from relevant documents. “If shares are issued against imported capital machinery, the bank shall forward the application to the Bangladesh Bank.”
This move by Bangladesh Bank to streamline foreign direct investment (FDI) approvals for smaller investments comes at a crucial time, as the country’s net FDI inflow during the first quarter of fiscal 2024-25 plummeted to an 11-year low of $104 million.
The decline was attributed to factors such as political instability and economic uncertainty centring the student-led mass upsurge and subsequent fall of the Sheikh Hasina-led government during the period.
Data from the central bank say the net FDI inflow in the same quarter of FY24 was $361 million, meaning it decreased by 71% compared to the previous fiscal year. https://www.tbsnews.net
