Bank officials to face action for delays in LC payment

Due to delays in timely LC bill payments, relations between local and foreign banks are deteriorating, says Bangladesh Bank

Bangladesh Bank will take punitive measures against those involved in the respective bank if payments are not made on time after opening a letter of credit, or LC.

The directive came a day after central bank Governor Ahsan H Mansur in a meeting with the MDs of 17 banks told them not to delay payments after opening an LC.

On Tuesday, the Foreign Exchange Policy Department of the Bangladesh Bank sent a circular to that end to the managing directors and chief executives of all banks.

For the past couple of years, due to an inadequate dollar supply, banks have faced issues in opening LCs and making timely payments.

The dollar shortage has created difficulties for industries, large and small companies, as well as entrepreneurs. Although the dollar supply has improved, many banks are still reportedly not settling LCs on time.

A senior official of Bangladesh Bank said their monitoring reveals some banks are failing to pay on time, even though there is currently no shortage of dollars in the banking channels. Taking this into account, the central bank issued a warning to banks about taking action.

The notification said delays in LC payments are damaging relations between local and foreign banks.

It is unacceptable for any bank to delay payments. It added and warned that punitive measures would be taken against the authorised dealers, or AD, of foreign exchange dealing banks involved in LC operations.

The circular also instructed banks to check past records and exercise caution in LC openings. Banks were advised to review customers’ credit limits at the time of LC issuance.

Another Bangladesh Bank official told bdnews24.com that each bank has a credit limit that determines the volume of LCs a bank can open.

Bangladesh Bank has received specific information that some banks are exceeding their credit limits to open LCs.

For this reason, it has instructed banks to avoid opening LCs beyond their credit limits.

The official added that both funded and non-funded credit limits are specified. No LCs should be opened beyond these limits.