The central bank has imposed a restriction on short-term buyers' and suppliers' credits from overseas sources for import to minimise repayment risks.
Under the restriction, the payment will have to be made on a quarterly basis, if the import value exceeds $0.5 million or the loan tenure is more than six months.
The Bangladesh Bank (BB) issued a circular in this connection Sunday and asked all the commercial banks to follow the latest instructions relating to external financing for import through buyers' and suppliers' credits.
"We've imposed such a restriction on all external short-term buyers' and suppliers' credit arrangements to minimise repayment risks and ensure discipline," a senior official of the BB told the FE.
He also said the central bank allowed buyers' credit for imports in 2012 to facilitate the country's overall industrial productions.
The latest BB move has come against the backdrop of the upward trend of deferred import payments in the recent months. The restriction has been put in place, as the trend might create volatility in the local foreign exchange market.
"Use of short-term (up to one year) external import financing for eligible deferred import payment has been increasing over the recent quarters," the central bank said in its circular.
Repayment outflows thereof are seen to have remained rather erratic, and not rising in proportion to the accumulating aggregate liabilities, according to the circular.
"This tendency, if sustained, may cause abrupt bunching up of large FX (foreign exchange) fund outflow pressure on the local market at irregular, unpredictable intervals," it noted.
The circular also said one-time repayment terms, officially known as 'bullet repayment', will be admissible only on financing for terms not exceeding six months, and only on shipments not exceeding $0.5 million or equivalent in value.
"Bullet repayment terms will be inadmissible for financing exceeding $0.5 million or equivalent in value or for terms exceeding six months. The financing arrangements must stipulate quarterly repayments," the BB said.
However, in these cases the repayment instalment due after the first quarter may be set lower than the subsequent ones, in consideration of prospective cash flows, subject to being not less than one-tenth of the total amount payable, according to the circular.
"Outstanding external short-term debt will decline gradually following the restriction. On the other hand, private sector credit demand in local currency may also increase in the near future," a senior official of a leading private commercial bank explained.
