# Bangladesh Bank Now Allows Foreign-Currency Guarantees for Local Projects

*Bangladesh Bank has introduced a new policy allowing authorised dealers to issue foreign-currency guarantees for foreign firms involved in local projects.*

August 27, 2026 · business

Bangladesh Bank (BB) has allowed authorised dealers (ADs) of foreign exchange to issue bank guarantees and standby letters of credit (SBLCs) in foreign currency on behalf of resident entities in favour of local project and procurement authorities. The decision, announced in a circular issued by the Foreign Exchange Policy Department-1 (FEPD-1) of Bangladesh Bank, aims to facilitate the participation of foreign companies in projects awarded through international tenders.

Foreign companies awarded contracts or work orders under international tenders in Bangladesh may require bid bonds, performance guarantees or SBLCs in favour of relevant government authorities, departments, agencies, state-owned enterprises, project or procurement entities and other duly authorised bodies. To facilitate such arrangements, ADs may now issue guarantees or SBLCs in foreign currency on behalf of resident entities in favour of relevant project or procurement authorities against contracts or work orders awarded to foreign companies through international tenders.

The facility is subject to several conditions. The underlying contractual arrangements must allow the relevant project or procurement authorities to accept the guarantees or SBLCs. Resident entities must also have bona fide contractual or commercial relationships with the foreign awardees, supported by documentary evidence. Bangladesh Bank has instructed ADs to ensure that their exposure arising from the issuance of guarantees or SBLCs is appropriately covered by collateral or counter-security, proportionate to the nature and extent of the exposure and based on the banker-customer relationship and underlying contractual arrangements.

## FAQ

Q: What are the key conditions for issuing these guarantees?
A: The underlying contractual arrangements must allow the relevant authorities to accept the guarantees or SBLCs. Resident entities must have bona fide contractual or commercial relationships with the foreign awardees, supported by documentary evidence. ADs must ensure their exposure is covered by appropriate collateral or counter-security.

Q: How will claims arising from the guarantees be settled?
A: Claims will ordinarily be settled in taka equivalent. However, if the tender or contract documents specifically require settlement in foreign currency, ADs may settle the claim in foreign currency through the Real Time Gross Settlement (RTGS) system.

Q: What are the benefits of this new policy for foreign companies?
A: This policy allows foreign companies to more easily participate in local projects by providing the necessary financial guarantees in foreign currency, thereby facilitating smoother project execution and reducing financial risks.

Q: Are there any specific compliance requirements for ADs issuing these guarantees?
A: Yes, ADs must issue such guarantees or SBLCs in line with applicable credit norms, risk-management policies and prudential parameters, including the prescribed single-borrower exposure limit. Required approval from the board of directors or competent authority must also be obtained where applicable.

## Sources

- BSS

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Source: https://pulsetoday.com.bd/en/business/bangladesh-bank-allows-foreign-currency-guarantees-local-projects