"The cabinet has ratified the Extradition Treaty with India," cabinet secretary Mosharraf Hossain Bhuiyan told reporters after a cabinet meeting chaired by Prime Minister Sheikh Hasina.
He said the treaty would now require the approval of the Parliament and it could come into effect after both the sides exchange documents following legal procedures.
The Indian cabinet had already endorsed the treaty, Bhuiyan said.
The agreement would pave the way for sending back top ULFA leader Chetia, who has been lodged in Bangladeshi prison for over a decade, to India.
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According to the agreement, only persons with charges like murders, culpable homicide and other serious offences would come under the purview of the deal while offenders of small crimes awarded with imprisonment for less than one year will also not be wanted under the treaty.
Bhuiyan said persons accused of political crimes would also not come under the purview of the treaty.
Officials, however, said the agreement would pave the way for sending back Chetia to India as he has already served his sentence in Bangladesh and expressed his desire to return home.
Earlier, media here had reported that Bangladesh was set to return Chetia to India as he sought to be repatriated after languishing in jail for 16 years.
Chetia - ULFA's founder general secretary - had sought political asylum in Bangladesh thrice in 2005, 2008 and in 2011 after being arrested from Dhaka's Mohammadpur area in 1997.