EBL, ADCB sign master forfaiting agreement

Eastern Bank Ltd (EBL) has signed a master forfaiting agreement with Abu Dhabi Commercial Bank (ADCB) and successfully completed a pilot forfaiting transaction, which will be guided by the Uniform Rules for Forfaiting (ICC Publication no. 800).

Forfaiting transactions can easily convert a credit sale into a cash sale, said a statement.

Ali Reza Iftekhar, managing director and CEO, EBL, said, "This transaction will facilitate exporters immensely in terms of balance sheet and cash flow management, getting early payment on without recourse basis for LC transactions. URF 800 provides necessary rules for the sale of financial claims, and it is also designed to facilitate the sale of those instruments in the secondary market."

Mehdi Zaman, DMD and head of treasury, FI and OBU, said, "The first pilot Forfaiting transaction secured the export proceeds realization. This product will enhance the export proceeds realization framework. EBL deeply acknowledges ADCB to become a partner in this transaction, which will transform export business in Bangladesh."

Krishnakumar (KK), head, transaction banking sales, ADCB, said, "ADCB has been supporting Bangladesh trade flows for almost a decade and we have introduced forfaiting as a solution to help exporters reduce their cash flow cycle. We hope to pilot a few more transactions with several partners and help commercialise this solution to help banks in Bangladesh support their exporters."

In the pilot transaction, ADCB purchased an export LC risk under the forfaiting agreement with EBL and provided immediate cash without recourse basis while EBL handled all the documents under the LC for the exporter.

This solution is favourable to exporters in quicker realization of export proceeds especially with the current situation where foreign currency is in demand to manage growing imports.