Banks can now issue power-energy import payment guarantees without BB approval
However, banks must obtain approval from the relevant ministry before issuing guarantees
To streamline the import process for essential government goods and services, banks will now have the authority to independently issue payment guarantees for power and energy imports, eliminating the need for prior approval from the central bank.
However, banks will require approval from the ministry responsible for the imports, according to a circular issued yesterday by the Bangladesh Bank's Foreign Exchange Policy Department.
A senior official from the central bank told TBS that many government entities within the power and energy sectors frequently sought late approval for payment guarantees. To prevent disruptions to these vital national services, the central bank has eliminated the requirement for prior approval.
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According to the circular, to facilitate the import of emergency goods and services by competent authorities/entities in the power and energy sector, it has been decided that banks may issue bank guarantees or Standby Letters of Credit in favour of foreign suppliers as payment security on behalf of importers, subject to the approval of the concerned ministry.
A Standby Letter of Credit is a legal instrument issued by a bank on behalf of its client, guaranteeing payment to the seller if the buyer defaults on the agreement.
When issuing guarantees or such LCs, banks must ensure that the underlying import transaction is executed under sales or purchase contracts, the circular added.
