BB asks banks to follow URC documentary collection for transparent contract-based trade

The Bangladesh Bank has directed banks to adhere to international rules and regulations in import-export transactions based on sales contracts.

Specifically, when using the documentary collection method, banks are required to strictly follow the internationally recognised Uniform Rules for Collection (URC).

In this regard, the central bank has issued a circular today (13 July), emphasising regulatory compliance in all modes of trade transactions.

As per earlier instructions, banks are required to comply with the Uniform Customs and Practice for Documentary Credits (UCP 600) for all Letters of Credit (LC)-based transactions – for both imports and exports. 

Reinforcing its commitment to align domestic banking practices with global standards, the central bank has now reiterated that equivalent compliance is essential for alternative trade financing modes as well.

The latest directive affirms that banks may handle permissible international trade transactions through various payment mechanisms – including cash in advance, documentary collection, and open account.

This may be done in addition to traditional LC-based arrangements, in line with the prevailing Import Policy Order, Export Policy, and relevant foreign exchange regulations.

As per the circular, when trade transactions are conducted under the documentary collection method based on sales contracts, banks shall follow the URC, as issued by the International Chamber of Commerce (ICC).

Industry insiders believe this move by the Bangladesh Bank clarifies the distinct regulatory frameworks governing different trade methods. 

While the UCP will continue to regulate LC-based transactions, the URC will explicitly be applicable for documentary collection against contract-based trade. 

This clarification is expected to reduce operational ambiguities, reinforce compliance, and enhance the overall credibility and efficiency of the trade payments ecosystem.