BB governor asks banks to create forced loans for unpaid import LCs
As per rules, banks are supposed to convert unpaid LC obligations into forced loans if clients fail to make timely payments, he says
Bangladesh Bank Governor Ahsan H Mansur has issued a strict directive to all banks to create forced loans against clients who fail to settle their import-related Letters of Credit (LC) payments on time.
The instruction was given during a bankers' meeting held at the central bank today (8 July) attended by managing directors of both state-owned and private commercial banks.
Chairing the meeting, the governor said that as per rules, banks are supposed to convert unpaid LC obligations into forced loans if clients fail to make timely payments. However, many banks have been neglecting this requirement.
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He warned that such non-compliance should not happen in the future and asked all banks to strictly follow the regulations.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, told TBS that during the meeting, banks were informed that some banks avoid creating forced loans against clients even when import bills remain unpaid – just to present a healthier Net Open Position (NOP) or to stay within the Single Borrower Exposure Limit.
"The governor clearly instructed all banks to stop such practices," he added.
Several managing directors who attended the meeting also said the governor encouraged banks to promote treasury bill purchases at the individual client level. He reportedly expressed his intent to reduce the government's borrowing from savings certificates.
In addition, the governor directed banks with foreign exchange houses abroad not to purchase foreign currency from those houses at rates higher than the prevailing market rate.
Mohammad Ali, managing director and CEO of Pubali Bank, said the governor has pushed for creating a cashless society.
"The governor has instructed us to increase digital transactions and boost the number of mobile app users across banks. We assured him of our full commitment to this effort," he said.
Another bank's managing director said the governor also directed banks to closely monitor the pricing of export products. "Unlike imports, where the prices of items – such as machinery – can be verified using various websites, pricing exports is more complex," he said.
"Most of our exports are contract-based, which means the same product can have different prices depending on the buyer. Still, we will try our best to comply with the central bank's instructions by analysing historical pricing data for the relevant export products," he added.
