Cenbank directs banks to clear overdue LC payments

The Bangladesh Bank has issued stern directives to banks asking them to clear overdue letters of credit payments for both general and back-to-back imports quickly, warning to take punitive actions if they fail to comply.

The directive was made during the 37th meeting of the Bangladesh Bank Authorised Dealer's Forum held today, with representatives from at least 25 banks in attendance.

Apart from instructing to take necessary steps to settle overdue bills, the central bank has also sought explanations from multiple banks regarding their failure to settle import payments on time, according to senior officials from several banks, who were present at the meeting.

The Foreign Exchange Operation Department's Import Trade Division regularly monitors the settlement of overdue local and foreign accepted bills on a quarterly basis and the central bank  informed during the meeting that the explanations were sought based on this monitoring process.

A deputy managing director of a private bank, seeking anonymity, said, "Among the many reasons, delays often occur in settling back-to-back import LCs because these payments are made after receiving export proceeds. In some cases, it can take a month to receive export proceeds, leading to delays in clearing payments at maturity. This has been communicated to the central bank."

During the meeting, senior officials from the Bangladesh Bank reiterated existing regulations under the "Guidelines for Foreign Exchange Transactions (GUET)-2018", which require timely settlement of import payments. 

They also reminded the banks of previous circulars mandating adherence to payment deadlines. 

The central bank further warned of punitive measures, including the suspension of the authorised dealer (AD) licenses of non-compliant branches. It also stated that non-compliance with the directive could result in both institutional penalties and personal liability for officials involved in such transactions.  

Bank officials at the meeting assured the central bank of their commitment to clearing overdue payments swiftly, in line with the instructions and regulatory requirements.

Bangladesh Bank spokesperson and Executive Director Husne Ara Shikha told The Business Standard, "The dollar liquidity in our banking sector is currently stable, and the country's foreign exchange reserves have also been steady for several months. There is no acute dollar crisis now, which is why banks are being repeatedly instructed to clear overdue payments. We expect these payments to be settled soon."  

Import and export LC trends  

According to the central bank, during the first five months of FY25 (July-November), banks opened import LCs worth $28.12 billion, reflecting a marginal 0.05% increase compared to the same period last year. However, LC settlements decreased by 0.83% year-on-year, amounting to $27.94 billion.  

Notably, back-to-back LCs for raw materials for export products saw a significant increase during the same period, with LC openings and settlements rising by 15.3% and 20%, respectively, compared to the previous fiscal year.