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Foreign Exchange Laws in Bangladesh

Table of Contents

Bangladesh maintains a regulated foreign exchange environment. While the Bangladeshi Taka (BDT) is convertible, the movement of foreign currency into and out of the country is subject to specific rules and requires appropriate documentation. Understanding this framework is crucial for businesses and individuals engaging in international transactions.

The Legal Framework: FERA and Bangladesh Bank#

The cornerstone of foreign exchange regulation is the Foreign Exchange Regulation Act, 1947 (“FERA”). This Act provides the fundamental legal basis for controlling payments, dealings in foreign exchange, and securities involving foreign currency.

FERA empowers the Bangladesh Bank (BB), the central bank of Bangladesh, to act as the primary regulator for all foreign exchange transactions. Based on the authority granted by FERA, Bangladesh Bank periodically issues notifications, circulars, and rules to manage foreign exchange dealings effectively.

Guidelines for Foreign Exchange Transactions (GFET)
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To consolidate its various directives and provide clarity, Bangladesh Bank compiles and publishes the Guidelines for Foreign Exchange Transactions (GFET). These guidelines serve as the comprehensive manual for conducting foreign exchange transactions in Bangladesh.

  • Current Version: The latest edition is the GFET 2018, comprising two volumes.
  • Compliance: All foreign exchange transactions must adhere strictly to the provisions outlined in the GFET and FERA. Non-compliance can lead to significant penalties, including potential criminal charges.
You will find Important Bangladesh Bank Circulars on Foreign Exchange issued by the Foreign Exchange Policy Department (FEPD) here and circulars from other relevant departments like the Foreign Exchange Investment Department (FEID) and Foreign Exchange Operation Department (FEOD) here.

Inflow vs. Outflow of Foreign Currency
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A key aspect of Bangladesh’s foreign exchange regime is the difference in regulating incoming versus outgoing funds:

  • Bringing Funds In: Generally, bringing foreign currency into Bangladesh is relatively straightforward, especially for investment purposes.
  • Taking Funds Out (Remittance/Repatriation): Sending foreign currency out of Bangladesh is subject to stricter controls. Bangladesh Bank, as the regulator, manages the outflow of funds primarily through two mechanisms:
    • General Permission: Under a general permission, specific prior approval from Bangladesh Bank is typically not required for transactions that meet predefined criteria (e.g dividend) or fall below specified monetary thresholds. However, such approval may still be necessary for remittances exceeding a particular limit or for transactions not explicitly covered by the general permission.
    • Specific Permission: In contrast, under a specific permission, each proposed remittance requires explicit authorisation from Bangladesh Bank before it can be processed.

Key Players in Foreign Exchange Transactions
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Authorised Dealers (ADs)
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Only entities licensed by the Bangladesh Bank as Authorised Dealers (ADs) are permitted to transact and hold foreign exchange, both domestically and internationally. Currently, these licenses are granted exclusively to scheduled banks operating in Bangladesh. ADs play a critical role in facilitating and verifying legitimate foreign exchange transactions.

Money Changers
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In addition to ADs, licensed money changers operate in Bangladesh. Their activities are generally limited to:

  • Buying foreign currency from tourists and visitors.
  • Selling foreign currency to outbound Bangladeshi travellers up to their permissible limits.

Certain service providers like hotels and shops may hold limited money changing licenses to accept foreign currency from foreign tourists, but they are required to sell these currencies to an AD.

Specific Scenarios
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Bringing Foreign Currency into Bangladesh
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Individuals, including foreign investors, can bring foreign currency into Bangladesh without an upper limit. However:

  • A declaration on the specified “FMJ form” must be made to the Customs Authorities upon entry if the amount brought in (or its equivalent in other foreign currencies) exceeds US$ 10,000.
  • Foreign currency brought in legally can generally be taken out, subject to producing the FMJ form declaration where applicable.

Repatriation of Capital, Profits, and Income
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  • Investors: Foreign investors can repatriate their invested capital, capital gains, post-tax dividends, profits, and approved royalties/fees through an AD, provided all necessary documentation as per GFET is submitted and verified.
  • Foreign Employees: Foreign nationals employed in Bangladesh (with necessary government approvals like work permits) can remit a portion of their income. Typically, this includes:
    • Up to 75% of their net monthly salary.
    • Actual savings and admissible retirement benefits.
    • Net salary for approved leave periods as per their government-approved service contract.

All such remittances must be processed through an AD and require supporting documentation.

Conclusion
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Navigating the foreign exchange laws in Bangladesh requires a clear understanding of the regulatory framework established by FERA and detailed in the GFET. The Bangladesh Bank, along with Authorised Dealers, plays a pivotal role in overseeing these transactions. Whether it involves bringing funds into the country, investing, or repatriating profits and income, strict adherence to the prescribed guidelines and documentation requirements is essential to ensure compliance and avoid potential penalties. Businesses and individuals are advised to consult with legal and financial experts to ensure their foreign exchange dealings are conducted in accordance with Bangladeshi law.

Key Official Guidelines and Circulars
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Supplementary Resources
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Key Contact

For expert advice and assistance regarding foreign exchange regulations in Bangladesh, please contact:

Important FEID and FEOD Circulars on Foreign Exchange
Important FEPD Circulars on Foreign Exchange