Bangladesh Bank (BB) has asked banks to make letters of credit (LC) payments on time.
"Delays in making import payments by banks are unacceptable against clean bills and accepted bills," said a BB circular issued on Tuesday.
The circular mentioned that the settlement procedure needs to be observed in respect of import transactions, including permissible inland deliveries in foreign currency.
Delay in payments deteriorates correspondent relations with counterparts and increases import costs.
Given the current improved situation, foreign exchange market of the country is in long position. In this context, delays in making import payments by Authorized Dealers (ADs) are not acceptable against clean bills and accepted bills.
These possible developments notwithstanding, market information and different reports indicate that some ADs are delaying or defaulting to make timely payments. This results in reputational loss for Bangladesh, leading to higher costs for imports relating to confirmation charges, trade credit, etc.
In order to rectify the situation, ADs need to adhere strictly to their commitments with regard to import payments. Accordingly, ADs shall follow the payment behavior framework as outlined below:
(a) Before issuing LCs, ADs shall ensure appropriate credit lines available for the respective importers.
(b) Issuance of LCs on behalf of importers without underlying credit facilities is subject to adequate cashflows and prospective fund arrangements to cover import payments.
(c) Usance import should be financed through buyer's credit by offshore banking operations, or by the own fund of ADs in terms of paragraph 5(b), chapter 16 of the Guidelines for Foreign Exchange Transactions-2018, Vol.1.
ADs are reminded to the effect that overdue import payments will no longer be acceptable. Failure to settle payments on time is subject to punitive actions, including personal accountability to the officials responsible for the transactions.
ADs are advised to comply with the above directives meticulously and clear all bills remaining overdue, if any, immediately.
