BB asks banks to comply with URC in contract-based trade transactions

Bangladesh Bank (BB) has asked the banks concerned to comply with international rules and regulations in import-export transactions based on sales contracts.

If the transactions are done through the documentary collection method, banks must follow the internationally recognised 'Uniform Rules for Collection (URC)', said the central bank of Bangladesh.

The BB issued the directive in a circular on Sunday (July 13).

According to the circular, commercial transactions can be made in three approved methods-- advance payment, documentary collection and open account.

In that case, the existing import and export policies, and foreign exchange management rules must be followed, it mentioned.

Banks have been following UCP (Uniform Customs and Practice for Documentary Credits) in LC-based import-export transactions for a long time.

Now the central bank has made it clear that even if trade is done through alternative methods, international rules must be followed.

It is mandatory to follow URC, especially in documentary collections-based sales contracts.

In the documentary collection method, the exporters' banks send documents through the importers' ones and the paper is handed over in exchange for payment or commitment under the specified conditions.

In this regard, the banks only act as a mediator for exchanging documents-it does not provide any financial guarantee.

People involved in the banking and trade sectors say this directive will be 'very helpful' for the banks.

According to them, the transaction process will be more transparent with clearly highlighting the issues of UCP in LC-based transactions and URC in contractual documentary collections.

"We hope that this of the central bank will help increase the reliability and efficiency of the payment systems in commercial transactions", a top commercial bank executive told the FE.

Jasimharooon@yahoo.com