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CHAPTER 1

INTRODUCTION AND DEFINITIONS

1. Foreign Exchange Regulation (FER) Act, 1947 (Act No. VII of
1947) enacted on 11th March, 1947 in the then British India
provides the legal basis for regulating certain payments, dealings in
foreign exchange and securities and the import and export of
currency and bullion. This Act was first adapted in Pakistan and
then in Bangladesh. The Act is reproduced at Appendix 1.
Bangladesh Bank is responsible for administration of regulations
under the Act. Appendix 4 provides a list of Bangladesh Bank's
offices and their jurisdictions.
2. Basic regulations under the FER Act are issued by the
Government as well as by the Bangladesh Bank in the form of
Notifications which are published in the Bangladesh Gazette.
Notifications issued by the Bangladesh Government and the
erstwhile Government of Pakistan and the Bangladesh Bank and
the erstwhile State Bank of Pakistan are reproduced at Appendices
2 and 3. Directions having general application are issued by the
Bangladesh Bank in the form of notifications, FE (Foreign
Exchange) circulars, SPA circulars and circular letters.
3. Authorised Dealers (ADs) in foreign exchange are required to
bring the foreign exchange regulations to the notice of their
customers in their day-to-day dealings and to ensure compliance
with the regulations by such customers. The ADs should report to
the Bangladesh Bank any attempt, direct or indirect, of evasion of
the provisions of the Act, or any rules, orders or directions issued
thereunder.
4. The ADs must maintain adequate and proper records of all
foreign exchange transactions and furnish such particulars in the
prescribed returns for submission to the Bangladesh Bank. They
should continue to preserve the records for a reasonable period for
ready reference as also for inspection, if necessary, by Bangladesh
Bank's officials.
5. This publication summarises the instructions issued under the
FER Act as well as the prudential instructions issued by
Bangladesh Bank (as of 31 May, 2009) to be followed by ADs and
Money Changers in their day-to-day foreign exchange transactions.

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6. Specimen forms (other than those of periodical returns dealt

with in Volume-2) prescribed in this publication are given in
Appendix- 5, while Appendix- 6 contains (i) Notification issued by
the Board of Investment for obtaining loan from abroad by
industrial enterprises in Bangladesh in the private sector (ii) Policy
Guidelines for establishment of Drawing Arrangement between the
Exchange Houses abroad and Banks operating in Bangladesh (iii)
List of required information/documents for seeking permission to
act under section 18A and 18B of Foreign Exchange Regulation
Act, 1947 and (iv) Guidelines to be followed to act as an agent (as
Satellite Channel Distributor) of foreign principal(s) under section
18A of Foreign Exchange Regulation Act, 1947.
7. Terms having a special meaning for the purpose of the FER Act
are defined under Section 2 of the Act. However, for the purpose
of this publication and the instructions issued by the Bangladesh
Bank from time to time, the following terms as defined below shall
be used in addition to those defined under Section 2 of the FER
Act, 1947.
(i) Resident and Non-Resident
Section 20(1) of Foreign Exchange Regulation Act, 1947 stipulates
that any person who has at any time after the commencement of the
Act been resident in Bangladesh be treated as resident in
Bangladesh until Bangladesh Bank by general or special order
directs otherwise. Where such directions are given, the Act also
empowers Bangladesh Bank, to declare the territory in which such
persons be treated as resident. Section 20 of the said Act as a whole
delineates the authority to Bangladesh Bank with respect to resident
status of any person, firm, bank, corporate body etc. and treatment
of transactions by different kind of entities. For the purpose of the
said Act, ordinarily, a resident is a person, bank or firm who/which
resides/has established a place of business in Bangladesh. A person
is deemed to be ordinarily resident if he maintains a home in
Bangladesh or resides in the country for a substantial part of each
year or pays income tax as a resident of Bangladesh. In addition to
that (i) in terms of Section 5 of Article II of the schedules
appended to the United Nation (Privileges and Immunities) Act,
1948, the accounts of United Nations and its Organisations, (ii)
persons holding Office in the Service of the Republic of
Bangladesh who go abroad or who are already abroad and residing
outside Bangladesh for the time being either on duty or on leave,
(iii) foreign nationals residing in Bangladesh for work or self
employment, (iv) foreign nationals residing in Bangladesh for study

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under student visa, (v) foreign nationals staying in Bangladesh with

residence visa, (vi) officials of Bangladesh Government and public
sector undertakings deputed abroad on assignment with foreign
governments/organisations or posted to their own offices (including
Bangladesh Diplomatic Missions abroad) and (vii) foreign
nationals residing continuously in Bangladesh for six months or
more would be treated as residents.
A non-resident is a person, bank or firm who/which resides/has a
place of business outside Bangladesh. Non-residents include
Bangladesh nationals who go out of Bangladesh for any purpose.
On the other hand, the fact that a person gives an address in
Bangladesh does not necessarily mean that he should be regarded
as a resident if he is, in fact, only a temporary visitor and is
ordinarily resident elsewhere.
(ii) Bangladesh Bank
Bangladesh Bank (BB) means the Bangladesh Bank established
under the Bangladesh Bank Order, 1972 (President's Order No. 127
of 1972).
(iii) Taka
Taka means the Bangladesh Taka unless otherwise specified.
(iv) Dollar
Unless otherwise indicated the term dollar used in this publication
shall mean the US dollar.
(v) Authorised Dealers
Wherever used in this publication, the term Authorised Dealer or
AD would mean a bank authorised by Bangladesh Bank to deal in
foreign exchange under the FER Act, 1947.
(vi) Money Changers
Wherever used in this publication, the term "Money Changer"
would mean a sole proprietorship or partnership firm/company
licensed by Bangladesh Bank under "FER Act, 1947" to act as
Money Changer for dealing in certain foreign exchange
transactions as directed by Bangladesh Bank from time to time.