The decision allows authorised dealer (AD) banks to offer commodity price hedging products to eligible importers, giving companies that source raw materials and other inputs a mechanism to manage volatility in global commodity markets.
Bangladesh now lets eligible importers hedge up to 100 per cent of genuine commodity exposure through authorised dealer banks, replacing the need for prior central bank approval.
The facility covers raw materials, intermediate goods, essential commodities and strategic imports; futures, swaps, index-linked forwards and options may be used only for risk mitigation.
The local media reported that the Bangladesh Bank move is intended to help importers improve cost planning and competitiveness by protecting them against adverse movements in international commodity prices. Before the new guidelines, importers needed prior central bank approval for commodity price hedging transactions, according to the reports.
Under the Bangladesh Bank guidelines, importers with genuine underlying commodity import exposure may use internationally recognised instruments through AD banks. The permitted tools include commodity futures, swaps, forward contracts linked to commodity indices and options.
The facility applies to importers of raw materials, intermediate goods, essential commodities and strategic imports.
The guidelines require hedging transactions to be used only for risk mitigation and not for speculative trading. AD banks must carry out due diligence, maintain proper documentation, disclose risks and report transactions to Bangladesh Bank.
The framework also allows appropriate structured hedging arrangements, including options and swap structures, as long as the transactions remain linked to genuine commercial exposures.
Fibre2Fashion News Desk (SG)
