Bangladesh Bank is planning to ask scheduled banks to open back-to-back letters of credit in favour of the country’s exporters if they (exporters) already have at least three years of business activities with the foreign importers concerned.

The central bank placed an agenda in this regard before its meeting with the banks on February 2 at the BB headquarters in the capital to get their opinions about the plan.

A BB official told New Age on Sunday that exporters, mainly from the readymade garment sector, usually opened local back-to-back LCs to produce their export items.

The bank concerned plunges into a difficult situation in the case of non-payment of the value of the exported items by foreign importers in due time, he said.

For this reason, the central bank is now thinking to allow the exporters to open back-to-back LCs evaluating the capacity of the importers.

The exporters, however, will have to conduct export-related activities with importers by taking their (importers’) credit report.

The credit report should be recognised by well-reputed international credit rating agencies.

The authorised dealer branches of the banks will have to ensure that the foreign banks, which will issue LCs for exported items from Bangladesh, are well reputed, according to a central bank planning paper.

The AD branches will have to ensure the capability of exporters against their work orders.

Every AD branch will have to form separate inspection team led by the branch manager concerned. The inspection team will have to monitor in person production activity, capability and stock of the organisations which will open back-to-back LCs.

The inspection team will have to monitor the matters at least once in a month, according to the BB proposal note.
The head office of a bank will have to form a special
cell which will conduct surprise visits to the factories of all clients in every six months.
Under the process, the banks will have to ensure that funded and non-funded loans taken by the exporters are properly used.
The special cells will have to place a recommendation paper to their respective board of directors whether the funded and non-funded loans will be properly used or not.

The BB is also planning to discontinue loan against trust receipt facility for the local LCs in a bid to check financial corruption in the banking sector.
Banks give the LTR facility to their clients if they fail to pay money against their imports in due time.

Banks make the payment to the exporters from LTR accounts of the clients, the BB official said.

Global LTR is popular among the businesspeople and it is a recognised system worldwide.
But, Bangladeshi businesspeople are enjoying LTR for local LCs for the process, the official said.

The banking sector has recently faced cases of massive corruption due to giving LTR facility by banks for the local LCs.

On December 2 last year, the Banking and Financial Institution Division of the finance ministry arranged a meeting with its secretary M Aslam Alam in the chair to discuss ways to stop anomalies taking place under the process of back-to-back LCs and LTR.

Following the meeting, the ministry issued a letter to the BB asking it to find ways to stop corruption in the process of LTR and back-to-back LCs by arranging a meeting with the state-owned banks.

As part of the move, the central bank prepared the proposal note and submitted it to the banks to gather their opinions, the BB official said.

The central bank will issue a circular to all banks regarding the matter after gathering opinions from the banks, he added.