The Bangladesh Bank has raised prior approval thresholds of capital repatriation for foreign investors substantially to Tk100 crore from existing Tk10 crore in line with international standard to liberalise capital outflows.
In a circular issued recently, the Bangladesh Bank said that it eased the capital repatriation rules which represents a significant step toward liberalising capital outflows and simplifying the regulatory framework for foreign investment in Bangladesh.
The new circular issued by Foreign Exchange Investment Department (FDID) of Bangladesh Bank yesterday (8 March) substantially expanded the scope of bank-level approvals. Authorised Dealer (AD) banks can now independently process repatriation for transactions up to Tk100 crore where the fair value has been determined by an independent valuer using prescribed valuation methods.
For transactions where the deal value does not exceed the Net Asset Value (NAV) based on the latest audited financial statements, AD banks may process repatriation irrespective of the transaction amount, eliminating a major bottleneck in the capital outflow process. Moreover, transactions up to Tk1 crore million do not require an independent valuation report at all.
To strengthen the governance of the delegated approval process, the circular mandates that AD banks constitute internal committees headed by the chief financial officer for smaller transactions and by the chief executive officer for transactions up to Tk100 crore to evaluate valuation reports and authorise repatriation.
These committees must include members with requisite professional certifications such as CFA. AD banks are also permitted to charge reasonable fees, as negotiated with their clients, for valuation assessments conducted by these internal committees.
Several procedural improvements have been introduced to reduce transaction timelines and enhance the integrity of the valuation process.
The circular now requires that the audited financial statements used for valuation shall not be older than six months from the date of the Memorandum of Understanding (MoU), failing which the target company must prepare audited financial statements for the interim period.
The AD banks are required to execute repatriation within five working days where no discrepancy is found, and to forward applications requiring Bangladesh Bank approval within 3 working days.
The overall transfer process must be completed within 45 days from the MoU signing date or Bangladesh Bank approval date, whichever is later. Post facto reporting to Bangladesh Bank is required within 14 days for all transactions processed at the AD level.
This master circular reflects Bangladesh Bank’s ongoing commitment to creating a more investor-friendly regulatory environment.
“By raising approval thresholds, empowering banks with greater decision-making authority, streamlining documentation requirements, and providing clear valuation guidelines aligned with international standards, the central bank aims to reduce the time and cost associated with capital repatriation for foreign investors,” according to the circular.
“These reforms are part of Bangladesh Bank’s broader agenda to streamline capital repatriation with a view to attracting more foreign investment in the coming days, enhance investor confidence, and position Bangladesh as a competitive destination for foreign direct investment,” said the circular.
Earlier, a high-level Capital Repatriation Committee was formed jointly by the Bangladesh Investment Development Authority (BIDA) and Bangladesh Bank to simplify the share transfer and repatriation process for foreign investors. The committee, led by BIDA Executive Member Nahian Rahman Rochi, finalised the reform package on 19 November last year, according to a press release.
Commenting on the development, BIDA Executive Chairman Ashik Chowdhury said, “A favourable investment environment emerges when investors can move forward with confidence at every stage of the investment process.
“By reducing approval complexities, allowing easy repatriation of sale proceeds, simplifying valuation and documentation procedures, and easing exit mechanisms for investors, Bangladesh is moving towards that goal. Such initiatives form the foundation for building a strong and trustworthy investment climate.”
