The Bangladesh Bank will be able to impose a fine of up to $5,000 or an equivalent amount in the local currency on the officials of offshore banking units (OBUs) if they provide false information intentionally.

The penalty was included in the draft Offshore Banking Act 2024 that the cabinet division yesterday approved in order to bring foreign and non-resident Bangladeshi individuals and institutions under the domestic banking channel.

The draft law received the nod in the cabinet meeting at the Prime Minister's Office with Prime Minister Sheikh Hasina in the chair.

According to the draft, OBUs will be slapped a fine of $2,000 if they fail to submit financial statements to the banking regulator on time and make delays in doing so.

If the violation continues, an additional fine of $100 will be charged for each subsequent day.

No direct or indirect tax on the interests or profits earned by banks through OBUs will be imposed and there will be no tax or duty on the earned income of the depositors, the draft Act said.

The government hopes the new Act will create the possibility of attracting investments and give a boost to the foreign currency reserves.

Offshore banking accounts are maintained in foreign currencies such as the US dollar, the British pound, the Japanese yen, the Canadian dollar, the Singapore dollar and the Swiss Franc against the local currency.

Banks have to apply to the BB to carry out offshore banking business. However, banks that are already operating offshore banking units will not need to apply.

Offshore banking operations have to be started within six months of obtaining the licence. Otherwise, the permission will be cancelled, said the draft.

Funds can be transferred from domestic units to OBUs with the special approval of the BB.

The units can mobilise deposits from foreign-owned companies at export processing zones, economic zones and hi-tech parks. OBUs can provide short-term loans to these companies, open letters of credit and offer guarantee facilities and foreign trade-related transaction services, among others.

Although offshore banking was approved in 1985, the relevant policy was issued in 2019. Currently, 39 banks have offshore units.

At the end of September, the total outstanding loans of OBUs stood at Tk 83,826 crore. Of the sum, Tk 1,755 crore turned into bad loans, which accounted for 2.9 percent of the funds disbursed, BB data showed.