Bangladesh Bank relaxes coverage for exporters
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The Bangladesh Bank has eased the import payment process of exporters operating beyond your specialised zones if payments from buyers are deferred.
According to the circular issued by the central bank on Thursday, the exporters will be allowed to pay back-to-back letters of credit rating after acquiring payments against export.
Exporters enjoy the back-to-back LC service for procurement of inputs against export orders.
In the circular, the BB explained, ‘The input procurements under backtoback LCs or usance LCs could be issued with realisation clause with respect to exporters operating outside specialised zones.’
Ahead of issuance of the circular, the payment center was only designed for export-oriented industries functioning in export digesting zones, monetary zones, hitech parks and additional zones permitted by the government.
The official of the central lender said that the BB had widened the scope of beginning LCs with realisation clause as many of the exporters were facing hardships due to the coronavirus outbreak.
In May this season, the country’s export income plunged by 61.57 % to $1.46 billion from $3.81 billion in the same month of last year as the coronavirus pandemic hit sales of making goods and global buyers cancelled or suspended import orders.
The BB in its circular, on the other hand, said, ‘The banking institutions, while granting the realisation clause in back-to-back LCs, must gratify themselves regarding execution of the relative export orders.’
The banks will have to satisfy themselves that the suppliers have decided to accept the relevant LCs with realisation clause.
Besides, it must be ensured that the liabilities must not be settled under ‘net-off’ arrangement with export proceeds.
Asked about the service, Bangladesh Knitwear Manufacturers and Exporters Association vice-president Mohammad Hatem said that the facility will be a great relief to get the exporters who was simply facing export purchase cancellations as a result of pandemic.
Lots of the exporters were facing issues as the banks were creating forced loans if they failed to realise the export proceeds because of order cancellations and delays found in payment, he said.
‘For instance, export orders of my organisation worthwhile $63 lakh have already been cancelled due to the coronavirus,’ Hatem said.
‘Meanwhile, I have imported inputs amounting to $42 lakh for completion of the orders under back-to-back again LCs,’ he added.
He, however, talked about that the central bank’s circular lacked clarity regarding payment against back-to-back LCs in case of order cancellation.
Hatem said that in order to help the exporters sharp the repayments against the back-to-rear LCs, the federal government could permit the exporters to utilize the stimulus fund for repayment of such liability.
Otherwise, it would become difficult for the exporters to clear such payments and survive, he added.
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