Bangladesh Bank has approved the introduction of forward rate contracts to mitigate interest rate fluctuation risks in import trade. The facility will apply to usance imports under suppliers’ and buyers’ credit arrangements. A circular issued on Thursday stated that authorized dealer banks may enter into forward rate contracts with importers borrowing in foreign currency to protect them from international benchmark rate volatility, particularly the Secured Overnight Financing Rate (SOFR).

According to the circular, the contracts must be used solely for risk management and linked to genuine import transactions, prohibiting speculation or uncovered positions. Banks must fully offset any exposure through same-day reverse transactions, ensuring no market risk on their own accounts. The central bank capped banks’ pricing margin at 10 basis points and limited total forward rate contracts to 25 percent of the average monthly foreign currency inflow over the past 12 months.

The directive also requires adherence to international contract standards, daily mark-to-market valuation, effective internal risk management, and proper documentation. Industry participants believe the measure will help importers manage interest rate uncertainty and foster the development of a regulated financial derivatives market in Bangladesh.