Central Bank Eases Forex Rules to Help Merchants Serving Foreign Visitors

Bangladesh Bank has rolled out a targeted relaxation of foreign-exchange rules that allows selected businesses catering to overseas customers to keep a limited share of their card receipts in foreign currency rather than converting the entire amount into taka.According to a circular issued by the Foreign Exchange Policy Department on Sunday, authorized dealer banks may now permit hotels, resorts, restaurants, shopping malls, retail outlets and other eligible establishments to retain up to 15 percent of the foreign currency they receive from foreign visitors. The facility applies specifically to payments made through internationally issued cards and other instruments the central bank has already approved. The remaining 85 percent of such receipts must still be converted into Bangladeshi taka and credited in the normal way.

The retained portion is not free capital. Banks can allow merchants to use the foreign-currency balances only to meet genuine current-account obligations, such as payments made with international cards or other permitted external settlements, and only in accordance with existing Bangladesh Bank guidelines. Authorized dealers have been told to confirm that participating merchants actually possess proper arrangements to accept international cards and that all applicable taxes and value-added tax are correctly calculated, deducted and deposited before any retention is permitted.

The step is designed to reduce practical frictions for businesses that regularly deal with foreign guests. Hotels and resorts, for example, often need foreign currency to settle overseas booking platforms, import specialized supplies or pay international service providers. Shopping malls and restaurants that attract tourists face similar, if smaller, requirements. By letting them hold a modest slice of the proceeds inside the formal banking system, the central bank hopes to make it more attractive for these businesses to route visitor payments through official channels rather than informal arrangements.

At the same time, the 85 percent conversion requirement preserves the bulk of the inflow for the domestic banking system and for the country's overall foreign-exchange reserves. The measure therefore tries to balance two goals: giving tourism- and retail-facing firms greater operational flexibility, and preventing large volumes of foreign currency from remaining outside the formal system for prolonged periods.In practice, the process will depend heavily on how banks implement the circular. Authorized dealers must open or designate appropriate foreign-currency accounts for the merchants, monitor the source of each receipt, and ensure that only payments genuinely originating from overseas visitors qualify. They are also expected to maintain proper documentation so that any later use of the retained balances can be verified against the rules governing current-account transactions.

Industry participants who work with foreign visitors have long argued that rigid conversion rules force them either to absorb extra conversion costs or to seek workarounds. The new 15 percent window is narrower than the retention quotas available to some exporters, but it is the first time the central bank has extended a similar facility to domestic merchants serving non-resident customers. Whether the change produces a measurable rise in formal card acceptance or in reported foreign-visitor spending will depend on how widely banks and merchants adopt it in the coming weeks.

The circular takes effect immediately and forms part of Bangladesh Bank's continuing efforts to fine-tune foreign-exchange regulations in sectors that generate hard-currency inflows. For hotels, restaurants and retailers that rely on overseas guests, the practical test will be whether the retained balances prove useful enough to justify the extra compliance steps, and whether the facility encourages more businesses to bring visitor payments fully into the regulated system.