Open Trade Bangladesh
Home / Export room / Part Q
Lesson 41 of 42 · Part Q · Level 2 · Explained

Foreign currency-Taka swaps: what they are and how long they run

Why Bangladesh Bank lets exporters swap the dollars in their 30-day pools and ERQ accounts for Taka for a short time, what a swap is (a spot purchase with a simultaneous forward sale), how long it may run, and how the swap points are set.

Q-1Q-2Q-3Q-4

In Lesson 40, Foreign currency accounts for zone enterprises, Mehnaz learned that her Type A sweater factory may keep all its export dollars, and that the Taka pocket is a one-way door.

Now we reach Part Q, the last Part of the export circular, and an old problem returns. In Lesson 38 Evelyn kept 15% of her woven-shirt export in her ERQ account, and in Import Lesson 27 her dollars waited in a pool for fabric bills due within 30 days. Today she is short of Taka. "Wages are due on Thursday," she tells Eliana. "My dollars are sitting there, but I will need them again in three weeks for a fabric bill. If I sell them now and buy them back later, I lose on the two rates. It's like selling your umbrella in the morning because you need bus fare, then buying it back in the evening when it rains."

Eliana smiles. "Part Q was written for exactly that umbrella." She calls in Shirin, who spent 35 years in banking and headed trade and foreign exchange at a large bank. Shirin has booked more swaps than she has eaten fuchkas. "A swap buys your dollars for Taka today," she says, "and sells them back to you at the end, at a rate you agree today."

This lesson covers Q-1 to Q-4: why swaps are allowed, what a swap is, how long it may run and how it is priced.

Para Q-1New to the master circular

In consideration of prevailing trends in foreign …

In plain words

Q-1 explains why Part Q exists. Bangladesh Bank looked at three things:

  • the trends in foreign exchange earnings;
  • exporters' liquidity requirements, that is, their need for ready cash; and
  • the need to minimize exchange losses from premature conversion of export proceeds, in other words changing dollars into Taka too early, only to need dollars again later.

With these in mind, Bangladesh Bank reviewed the existing framework for keeping and using foreign currency held in two places:

  1. the pools under paragraphs 55(2) and 56(1) of FE Circular No. 33, dated August 14, 2025, and later circulars; and
  2. ERQ accounts, under Part-O of this circular (Lessons 38 and 39).

Q-1 itself sets no rule. It is the "why" behind Q-2 to Q-8.

At the desk

Evelyn asks Eliana why the bank is suddenly offering something new. Eliana reads her Q-1: Bangladesh Bank reviewed how exporters keep and use the dollars in their pools and ERQ accounts, with an eye on exporters' need for cash and on the exchange losses they suffer when they convert export money too early. "So the rule was written for people like you," Eliana says.

Key words
Liquidity
Having enough cash, or things that quickly turn into cash, to pay bills when they fall due.
Premature conversion
Changing foreign currency into Taka earlier than needed, for example when the same dollars will be needed again soon.
ERQ
Exporters' Retention Quota: the share of export earnings an exporter may keep in foreign currency, in an ERQ account.
Read the rule as written (Para Q-1)

In consideration of prevailing trends in foreign exchange earnings, exporters' liquidity requirements, and the need to minimize exchange losses from premature conversion of export proceeds, Bangladesh Bank has reviewed the existing framework for retention and utilization of foreign currency funds held in respective pools (ref. paragraphs 55(2) and 56(1) of FE Circular No. 33, dated August 14, 2025 and subsequent circulars) and Exporters' Retention Quota (ERQ) accounts (ref. Part-O of this circular).

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 1 (page 58). The original circular is the authority.

Ask about this paragraphReport a mistake
Para Q-2New to the master circular

To facilitate exporters' short-term liquidity …

In plain words

Q-2 creates the tool. To meet exporters' short-term need for Taka while they keep their foreign currency holdings, ADs may enter into foreign currency-Taka swap arrangements with exporters, against the balances in their 30-day pools and ERQ accounts.

The definition. For this circular, a swap is:

  • a spot purchase of foreign currency against Taka, with
  • a simultaneous forward sale at an agreed rate and maturity,
  • using underlying foreign currency sources owned by exporters.

In everyday terms for the exporter: today the dollars are bought for Taka, so the exporter gets Taka now; at the same moment a forward sale is agreed, so on the agreed date the dollars come back to the exporter at the agreed rate. Both legs are fixed on day one. Nobody guesses the rate later.

Q-2 doesn't say in words who buys and who sells. Its purpose (Taka now for the exporter, foreign currency kept) points to the AD buying the foreign currency spot and selling it back to the exporter forward.

Shirin's picture: "Think of selling your bicycle to a trusted friend for cash today, and both of you signing, today, the date and price at which you will buy it back."

At the desk

After more export proceeds, Evelyn has USD 20,000 in her ERQ account (pretend figures). Eliana explains that under Q-2 the AD may buy the dollars from her today against Taka (the spot leg) and, at the same time, agree to sell them back to her on a set date at a set rate (the forward leg). Evelyn gets Taka for Thursday's wages and still has her dollars coming back for the fabric bill. Shirin adds, "Notice the dollars are hers. A swap works only on foreign currency the exporter owns."

Key words
FC-Taka swap
Under Q-2, a spot purchase of foreign currency against Taka with a simultaneous forward sale at an agreed rate and maturity, using foreign currency owned by the exporter.
Spot purchase
Buying a currency at today's rate for settlement straight away, usually within two working days.
Forward sale
An agreement made today to sell a currency on a set future date at a rate fixed today.
Read the rule as written (Para Q-2)

To facilitate exporters' short-term liquidity requirement in Taka while maintaining foreign currency holdings, ADs may enter foreign currency-Taka swap arrangements with exporters against balances held in their respective 30-day pools and ERQ accounts. For the purpose of this circular, such a swap is defined as a spot purchase of foreign currency against Taka with a simultaneous forward sale at an agreed rate and maturity, using underlying foreign currency sources owned by exporters.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 2 (page 58). The original circular is the authority.

Ask about this paragraphReport a mistake
Para Q-3New to the master circular

The tenor of a swap must not exceed the expected …

In plain words

Q-3 sets how long a swap may run, its tenor:

  • for swaps against ERQ balances, the tenor must not exceed the expected utilization period, that is, the time until the exporter expects to use those ERQ dollars;
  • for swaps against 30-day pools, the tenor is limited to a maximum of 30 days.

And the end is fixed: the facility against the swap is settled on maturity. Q-3 uses the word "facility", while Q-5 says a swap is not treated as a loan or financing facility; the circular doesn't explain this further.

So the swap can't outlive the reason the dollars are being kept. If Evelyn expects to use her ERQ dollars in three weeks, a swap against them must not run longer than that. The circular doesn't say how the expected utilization period is shown or worked out.

At the desk

Evelyn's fabric bill, to be paid from her ERQ dollars, is due in 21 days. She asks for a 45-day swap "to be safe". Eliana says no: under Q-3, a swap against ERQ balances must not run longer than the expected utilization period, here about 21 days. For dollars in her 30-day pool, the cap would be 30 days in any case. On the maturity date the swap is settled and the dollars come back.

Key words
Expected utilization period
Under Q-3, the time until an exporter expects to use its ERQ balances. A swap against ERQ balances must not run longer than this.
Settlement on maturity
Completing a deal on its agreed end date, when the money changes hands as agreed.
Read the rule as written (Para Q-3)

The tenor of a swap must not exceed the expected utilization period for ERQ balances, and is limited to a maximum of 30 days for 30-day pools. The facility against such swap is to be settled on maturity.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 3 (page 58). The original circular is the authority.

Ask about this paragraphReport a mistake
Para Q-4New to the master circular

The applicable swap points will be based on …

In plain words

Q-4 is about price. The forward rate in a swap is usually different from the spot rate; the difference between them is called the swap points.

Q-4 says the swap points are based on the interest rate or profit differential between the two currencies, and that this differential is market-reflective and/or cost-reflective. The circular names both "interest rate" and "profit". It doesn't say why, but some banks in Bangladesh work with profit rates instead of interest rates, so the wording covers both.

A pretend example: the spot rate is Tk 120.00 per US dollar and the swap points for 21 days are 0.40. The forward rate is then Tk 120.40. Evelyn receives Tk 120.00 per dollar today and pays Tk 120.40 per dollar to take her dollars back. The 40 paisa per dollar is the price of having Taka for 21 days while keeping her dollars. In this pretend example the forward rate is higher than spot; Q-4 doesn't say which way swap points must go. That depends on the rate or profit difference between the two currencies.

The circular doesn't give a formula or a figure for swap points; it only says what they are based on.

At the desk

Evelyn asks why the take-back rate is higher than today's rate. Shirin explains, with pretend figures, that the gap is the swap points, which Q-4 bases on the interest rate or profit difference between Taka and dollars, reflecting the market and/or the cost. "The gap reflects the difference in interest or profit rates between Taka and dollars over those three weeks," she says. "That is what the swap points measure."

Key words
Swap points
The difference between the forward rate and the spot rate in a swap. Under Q-4, it is based on the interest rate or profit differential between the two currencies.
Market-reflective
Based on rates actually seen in the market.
Cost-reflective
Based on the real cost of providing the funds.
Read the rule as written (Para Q-4)

The applicable swap points will be based on market-reflective and/or cost-reflective interest rate/profit differential between two currencies.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part Q, paragraph 4 (page 58). The original circular is the authority.

Ask about this paragraphReport a mistake
Putting it together

So far: Bangladesh Bank reviewed how exporters keep and use foreign currency in their 30-day pools (FE Circular No. 33) and ERQ accounts (Part-O), with an eye on exporters' liquidity and on exchange losses from converting too early. ADs may now enter into foreign currency-Taka swaps with exporters against those balances: a spot purchase of foreign currency against Taka with a simultaneous forward sale at an agreed rate and maturity, using foreign currency the exporter owns. A swap against ERQ balances must not run longer than their expected utilization period, a swap against a 30-day pool is limited to a maximum of 30 days, and the swap is settled on maturity. The swap points are based on the market-reflective and/or cost-reflective interest rate or profit difference between the two currencies.

Next: Lesson 42, Foreign currency-Taka swaps: safeguards, use of the Taka and zones, shows the rules that keep swaps safe, and closes the export room.

Check yourself

30 questions, in 3 sets of up to 10. Nobody sees your answers but you.

Set 1 of 3

1. According to Q-1, which of these did Bangladesh Bank consider when reviewing the framework?
2. Which two places holding exporters' foreign currency does Q-1 say were reviewed?
3. Which circular does Q-1 name for the pools?
4. What does 'premature conversion' of export proceeds mean in Q-1?
5. True or false: Q-1 itself sets the tenor limit for swaps.
6. Under Q-2, what is the purpose of FC-Taka swaps?
7. Against which balances may ADs enter into swaps under Q-2?
8. How does Q-2 define a swap?
9. Whose foreign currency may be used as the underlying source in a swap under Q-2?
10. True or false: under Q-2, the forward leg of the swap is agreed at the same time as the spot leg.

Set 2 of 3

11. True or false: Q-2 says ADs must offer swaps to every exporter who asks.
12. Desk case: Evelyn has USD 20,000 in her ERQ account and needs Taka for wages, but will need the dollars again soon (pretend figures). What does a swap under Q-2 do for her?
13. Desk case: A trader with no foreign currency of his own asks for a swap. What does Q-2 say?
14. Under Q-3, how long may a swap against a 30-day pool run?
15. Under Q-3, what limits the tenor of a swap against ERQ balances?
16. Under Q-3, when is the facility against a swap settled?
17. Desk case: Evelyn expects to use her ERQ dollars for a fabric bill in 21 days and asks for a 45-day swap 'to be safe'. What does Q-3 say?
18. Desk case: An exporter wants a 40-day swap against dollars in his 30-day pool. What should Eliana say?
19. True or false: Q-3 explains how the expected utilization period for ERQ balances must be proved.
20. What are swap points?

Set 3 of 3

21. According to Q-4, what are swap points based on?
22. True or false: Q-4 gives a fixed figure for swap points.
23. Q-4 speaks of an 'interest rate/profit differential'. What is the most likely reason 'profit' is included?
24. Desk case (pretend figures): spot is Tk 120.00 per US dollar, and in this example the swap points of 0.40 are added to the spot rate. What is the forward rate?
25. Desk case (pretend figures): In a swap on USD 10,000, Evelyn receives Tk 120.00 per dollar today and pays Tk 120.40 per dollar on maturity. What does the swap cost her in Taka?
26. Which word in Q-2 shows that the forward leg is agreed together with the spot leg?
27. True or false: under Q-2, the rate and maturity of the forward sale are agreed at the start.
28. Which paragraph explains the reasons for Part Q rather than setting a rule?
29. Desk case: Evelyn says, 'If I sell my dollars now and buy them back in three weeks, I lose on the two rates.' Which concern in Q-1 does this match?
30. Under Q-2, swaps meet a need for which currency in the short term?
Found this useful? Pass it on.

Brain feeling full? Take a tea break.