2 PCBs default on LC payments

Syful Islam | Published: December 14, 2013 00:00:00 | Updated: November 30, 2024 06:01:00

Two private commercial banks (PCBs) were allegedly not making payment against letters of credit (LCs), opened with the PCBs and insured by a sister concern of the Islamic Development Bank (IDB), sources said.
The LCs involving US$ 374,220 were opened with the two PCBs against five separate imports. The payments were due to be made in early November.
The Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), a sister concern of the Jeddah-based IDB, insured the LCs.
As the PCBs did not make the payments timely, the ICIEC recently sought intervention of the Economic Relations Division (ERD) under the ministry of finance (MoF) in resolving the problem. The ERD recently wrote to the PCBs, the financial institutions division under the MoF and the governor of Bangladesh Bank asking them to arrange for making the payments immediately against the LCs.
Earlier, a state-owned commercial bank on several occasions did not make payment against LCs, insured by the ICIEC, timely leading to the MoF's intervention in it.
The ICIEC earlier said credit rating of Bangladeshi banks might be affected negatively if the banks did not make the payments timely. It also said the 'confirmation cost' of LCs, opened with Bangladeshi banks, might increase from the present rate of 4.0 per cent per annum.
A senior official of the banks and financial institutions division told the FE that they would soon write to the two PCBs asking them to make the payments immediately to avoid any negative impact on the country's banking sector as well as external trade.
Â "We'll also ask the central bank to take the issue seriously so that no such problem arises in future," he said.
The official said once the credit rating was affected, many international banks might not show interest in such engagement with Bangladeshi banks. He said the external trade of the country might become further costly, if the confirmation costs of LCs increase due to such delayed payments.