The central bank has relaxed regulations, allowing commercial banks to issue guarantee on behalf of foreign-controlled firms favouring the local authorities against counter-guarantee from foreign banks.
The banks are also allowed to issue such guarantee in both local and foreign currencies without prior approval from the Bangladesh Bank (BB), a senior central banker said.
He also said the central bank has relaxed the guidelines for foreign exchange transactions to facilitate the foreign firms' business activities in Bangladesh.
"It will also help the foreign firms involved in implementing the mega projects in Bangladesh," the BB official explained.
The central bank of Bangladesh issued a circular in this regard on Thursday and asked all authorised dealer (AD) banks in foreign exchange to follow the instructions on issuance of guarantee on behalf of foreign-owned firms in favour of residents against foreign back to bank guarantee.
Under the existing regulations, the ADs are permitted to issue guarantee, bid bond or performance bond in foreign currency or in local currency on behalf of non-resident company favouring residents in Bangladesh, provided they hold a back to back guarantee covering the guaranteed amount from an overseas correspondent or other overseas banks.