Cenbank eases import rules for industries without LC

The central bank has introduced new measures to streamline imports for industrial establishments, enabling them to proceed without a traditional letter of credit (LC) and instead utilise a letter of agreement, marking a significant shift designed to enhance trade flexibility.

The directives will primarily benefit imports into specialised economic zones such as the Export Processing Zones (EPZs) and Economic Zones (EZs), according to a circular issued by the Bangladesh Bank today (24 October). 

It mandates that banks provide information on imports via the Bangladesh Bank's online reporting portal and obtain credit reports from suppliers. However, banks will not facilitate imports through contracts if there are any outstanding payments for prior imports beyond their maturity date.

Under the new system, importers can independently secure short-term foreign loans to settle their import liabilities. Furthermore, foreign lenders will be permitted to issue LCs, standby letters of credit (SBLC), or guarantees to suppliers, with both the principal loan amount and associated interest to be repaid according to the agreed terms.

Additionally, the central bank has granted general approval for corporate, personal, or third-party guarantees to facilitate short-term import credit, providing importers with greater flexibility in managing their financial obligations. 

The circular specifies that commercial imports under this agreement will benefit from a short-term foreign credit facility with a repayment period of up to 60 days, offering extra support to industrial enterprises engaged in foreign trade.

Traders have welcomed this new regulation, stating that it will pave the way for importing goods under sales contracts and eliminate confusion surrounding "third country imports" and "third country LCs". 

They said this change will facilitate imports from suppliers with whom they maintain good relations.

A central bank official acknowledged the existing market confusion regarding imports without LCs, despite the policy support outlined in the Import Policy Order. 

"The circular aims to provide clear guidance to promote contract-based imports, ultimately reducing banks' exposure to risk," added the official.