Cenbank relaxes LC margin on imports of specific products

The central bank has directed all commercial banks to relax the cash margin rate against the opening of import letters of credit (LCs) for 10 categories of products to keep the manufacturing sector normal.

The products include industrial and industry-related spare parts, textile raw materials, chemical and ancillary products, plastic products, UPS and IPS machinery.

In a circular issued to this effect on Tuesday, the Bangladesh Bank asked all banks to fix the opening margin rate based on banker-customer relations.

Previously, importers had to pay a 75% LC margin on imports of these goods.

However, for imports of other products, LC margins of 100% and 75% will still be applicable.

Banks are already unable to open LCs due to the dollar crisis and on top of that it is hard for businesses to pay high LC margins, Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, told The Business Standard. 

Therefore, this move by the central bank will help entrepreneurs, he said.

Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank Limited told TBS that the decision is the right move, especially for small businesses and manufacturing industries.  

Currently, banks have the flexibility to import some other products based on banker-customer relations.

These products include baby food, essential food products, fuel, medicines and equipment, directly imported capital machinery, raw materials for production-oriented local industries, export-oriented industries and agricultural products.