Bangladesh, July 2 -- The central bank has taken a significant step toward strengthening interest rate risk management in trade finance by allowing the use of Forward Rate Agreements (FRAs) for imports under suppliers' and buyers' credit.
Authorised dealer (AD) banks are now allowed to offer FRAs to importers availing foreign currency import loans, according to a circular issued by the Bangladesh Bank (BB) on Thursday.
The measure is aimed at protecting importers from volatility in global benchmark rates, particularly SOFR.
Under the framework, FRAs are strictly limited to hedging purposes and will be backed by genuine underlying import transactions, officials at the central bank said, adding that speculative or uncovered positions have...