Published: 11:19 PM, 03 October 2026
Building a Clearer Foreign Exchange Framework
Foreign exchange regulation is not only about what is permitted or restricted; it is also about how clearly the rules can be understood and applied. In Bangladesh, outward remittances have evolved through successive circulars, circular letters, amendments and clarifications issued over the years. For Authorized Dealers (ADs), this sometimes meant consulting multiple instruments to determine the applicable rule for a particular transaction.
Against this background, Bangladesh Bank has issued FEPD-1 Circular No. 40 dated September 30, 2026, containing a consolidated framework for outward remittances on account of current-account transactions other than imports and transportation services. The circular replaces the previous consolidated FE Circular No. 37 dated September 30, 2025, incorporating subsequent instructions issued during the intervening period.
The importance of the new circular therefore lies not simply in the individual facilities it contains, but in the effort to bring an evolving regulatory framework together in a single, updated instrument.
The consolidation approach has considerable practical value. When provisions are dispersed across numerous instruments, the cost of compliance is not limited to documentation. Banks have to identify the latest applicable provision, reconcile amendments and determine whether a subsequent instruction has modified an earlier one. Customers, particularly businesses engaged in regular international transactions, may also face uncertainty about the applicable requirements.
A consolidated circular provides a common reference point. It can facilitate faster decision-making by ADs, improve consistency in implementation, reduce avoidable correspondence and make internal audit and supervisory review easier.
The new circular is also significant because the outward-remittance framework has changed considerably over the past year. The consolidated text incorporates these developments instead of requiring users to consult the earlier circular together with every subsequent amendment.
One important area is travel-related foreign exchange. Bangladesh Bank has increased the annual travel entitlement for an adult Bangladeshi resident from USD 12,000 to USD 18,000 or equivalent, while maintaining a reduced entitlement for children below 12 years. The framework also retains restrictions on the release of US dollar notes within the overall entitlement. Incorporating the revised provision into the consolidated circular ensures that travel-related payments can be considered within the broader outward-remittance framework.
The framework has also responded to the changing nature of international payments. Outward remittances today are not confined to traditional travel expenditure or conventional business payments. Bangladesh's increasingly diversified economy requires payments for software, technical services, consultancy, professional services, royalties, technical assistance, insurance and reinsurance, international events, leasing arrangements and other legitimate current-account obligations.
The regulatory framework has consequently evolved to accommodate these transactions while retaining appropriate safeguards.
For example, provisions relating to lease-rental payments have been expanded to accommodate shipping companies incorporated in Bangladesh, subject to the relevant regulatory requirements. Likewise, enterprises operating in economic zones have been provided greater scope for remitting certain payments relating to royalty, technical know-how and technical assistance where the relevant approvals are available.
Such provisions reflect an important principle: foreign exchange regulation should facilitate genuine economic activity while maintaining adequate controls against misuse.
Another important development is the increasing use of international cards and electronic payment channels. Cross-border payments are progressively moving away from cash-based arrangements towards card and digital channels. Bangladesh Bank has accordingly incorporated facilities allowing international cards to be used for specified legitimate payments, including eligible air-ticket purchases, subject to prescribed conditions and appropriate reporting arrangements.
This shift is important because payment technology is changing faster than traditional regulatory structures. A modern foreign exchange regime has to recognize these changes without compromising traceability. The appropriate response is therefore not simply to permit new payment mechanisms, but to place them within a framework of customer due diligence, documentation, transaction records and reporting.
Consolidation, however, should not be confused with deregulation. The new circular continues to operate under the authority of the Foreign Exchange Regulation Act, 1947. A general permission under the circular does not dispense with requirements arising under other applicable laws and regulations. Depending on the nature of a transaction, ADs may still have to verify tax compliance, VAT implications, sector-specific permissions, underlying contracts, supporting documents and KYC/AML/CFT requirements.
The distinction between regulatory permission and regulatory compliance is therefore important. Where a transaction is covered by a general permission, the objective should be to enable its processing through the banking channel after appropriate due diligence. Where specific approval is required, the AD should ensure that the prescribed approval is obtained before effecting the remittance.
This brings the role of ADs into sharper focus. The AD bank is the principal operational interface between the foreign exchange regulatory framework and the customer. Its responsibility is to establish the genuineness of the underlying transaction, verify the required documents, ensure compliance with applicable laws and maintain adequate records. At the same time, implementation should avoid unnecessary procedural layers where the transaction is already covered by a clear general permission.
A consolidated framework can help achieve this balance. Instead of approaching each transaction through a fragmented approval-oriented process, ADs can increasingly rely on clearly defined permissions, standardized documentation and appropriate transaction-level controls.
This is particularly important for businesses with continuing international obligations. Predictability in outward payments helps businesses honour contractual commitments, pay for legitimate services and manage international operations without unnecessary uncertainty. For banks, a clearer framework can also facilitate the development of standard operating procedures and automated compliance checks.
The September 30 circular should therefore be viewed as part of a broader movement towards greater coherence in Bangladesh's foreign exchange regulations. Bangladesh Bank has increasingly been consolidating major areas of foreign exchange instructions so that users do not have to navigate an accumulation of historical circulars and amendments.
Such consolidation is especially relevant for outward remittances because these transactions represent a direct and frequent connection between the domestic economy and the international financial system.
The effectiveness of the consolidated circular will ultimately depend on its implementation. Consolidation can simplify the regulatory landscape only if the provisions are interpreted consistently, the distinction between general permissions and specific approvals is maintained, and reporting requirements are properly observed.
The circular itself also recognizes that consolidation is an ongoing process. New instructions issued during its period of validity will continue to be relevant, while the original circulars may need to be consulted where newly incorporated provisions create ambiguity or inconsistency. This is inevitable in a dynamic area such as foreign exchange regulation, where new products, payment technologies and business models continually emerge.
The larger significance of the initiative, therefore, is the movement from a fragmented rulebook towards a more coherent regulatory framework.
Bangladesh's external sector is becoming increasingly diverse. Businesses are participating in global supply chains, purchasing specialized services from abroad, adopting digital payment channels and developing more complex international commercial relationships. Individuals are also making a wider range of legitimate cross-border payments.
A modern foreign exchange regime has to accommodate this changing reality while preserving the integrity of the country's external payments system.
The consolidated outward-remittance circular represents an effort to strike that balance. It brings together the accumulated instructions, incorporates important developments of the preceding year and provides ADs and their customers with a clearer regulatory reference point.
The ultimate value of consolidation, however, is not measured by the number of provisions brought into one document. It is measured by whether a legitimate transaction can be identified clearly, processed efficiently and monitored effectively.
In that sense, the September 30, 2026 circular marks another step in the evolution of Bangladesh's foreign exchange regime—from a system built around successive individual instructions towards one increasingly organized around clarity, consolidation, controlled flexibility and effective compliance.
Mehdi Rahman writes on foreign trade
and monetary policies.
