BB urges best practices in LC payments

Bangladesh Bank (BB) has instructed all scheduled banks to adhere to best practices in processing payments against Letters of Credit (LCs).

In a recent notification, the central bank also allowed banks to consider defective import bills as eligible for payment, provided importers can present logical justification for accepting the errors.

It, however, emphasised that banks must ensure the acceptance of such bills does not lead to any change in the nature of the imported goods.

The directive comes amid reports that several local banks are declining to settle import bills with foreign banks, citing defects in documentation. This trend has been affecting the commercial relations between Bangladeshi and foreign banks, the notification noted.

To address this, Bangladesh Bank has urged domestic banks to align their practices with international standards in settling import payments.

The central bank further instructed banks to exercise caution when issuing delivery orders against import bills received through importers.

Previously, banks were allowed to make payments against defective bills or bills received directly by importers, but only after submission of the bill of entry following customs clearance.

Business leaders have long complained that despite receiving defective import bills, banks often refused payment, forcing foreign suppliers to wait until the goods were released, exposing them to financial risks.

The new directive is expected to reduce confirmation charges and interest rates on import loans, ultimately helping to lower overall import costs.