This paper analyses the contribution of exchange rate fluctuations of the Taka in contributing to the accumulation of debt overdues of private borrowers from the two DFIs of Bangladesh, BSB and BSRS. The evidence shows that with the exception of a few pre-liberation projects the overwhelming majority of borrowing enterprises have only carried a moderate exchange rate burden as a proportion of their foreign currency liabilities at the time of their repayment or as a proportion of their overdues to the DFIs. The study further establishes that there is no causal nexus between poor repayment performance of particular borrowers and their exchange rate burden. Thus the EFAS policy introduced by GOB to give some relief to defaulters is likely to have little impact on improved loan recovery by the DFIs. Finally the study provides evidence that most borrowers who did face a significant exchange rate burden could compensate themselves through enhancement of their product prices. The roots of the repayment crisis must thus be sought not in the exchange rate burden of the defaulting enterprises but in the substantive operational problems, management and market regimes of these projects.