Banks not paying import bills in time to lose forex trade licence
The central bank has asked scheduled banks to identify and take action against officials involved in foreign transactions irregularities
The Bangladesh Bank has warned the commercial banks that if they fail to pay their import bills in time, their authorised dealer (AD) licences for forex trade will be revoked.
In a notice issued Wednesday, the central bank also asked the scheduled banks to identify the officials involved in foreign transaction irregularities and take action against them.
The Bangladesh Bank said a number of banks that are not properly complying with the obligation of timely payment of import liabilities are causing disruption in foreign trade.
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In this context, instructions have been given again to the banks' AD branches to pay the foreign and local bills in time. If a bank does not comply with the instruction, the Bangladesh Bank will take necessary actions against the responsible officials and cancel the bank's AD licence.
A Bangladesh Bank official told The Business Standard that there is a guideline for export financing through commercial banks. But a number of banks have not been complying with it, which is harming the country's image abroad. So, the central bank has instructed the commercial banks to follow the rules.
However, many bankers said they cannot clear import liabilities in time due to the ongoing foreign currency crisis. Besides, the banks have not been receiving the export proceeds smoothly as the global markets became unstable due to recent geopolitical crises.
The country's imports exceeded exports in the last fiscal year, resulting in a trade deficit of $33 billion, which was the highest in the country's history. Foreign exchange reserves continue to decline due to large trade deficits.
In August 2021, foreign exchange reserves stood at $48 billion, which dropped to $41.82 billion at the end of FY22. After selling $4.5 billion in the current fiscal year, the reserve stood at $35.98 billion on 20 October.
The government has announced 100% letter of credit (LC) margin on all types of products except government imports to prevent depletion of reserves. As a result, the amount of imports has decreased.
According to the Bangladesh Bank's data, the LC opening and settlement rate has been declining since June this year. Importers opened LCs involving $8.44 billion in June, $6.35 billion in July, and $6.33 billion in August. It dropped further to $5.70 billion in September.
