BBN file photo
Dhaka, Bangladesh (BBN)- The central bank has relaxed policy on short-term import financing under buyer's credit aiming to facilitate industrial raw material imports.
Under the relaxation, the banks are allowed to issue repayment bank guarantees without the central bank’s approval in favoure of the International Islamic Trade Finance Corporation (ITFC) for importing industrial raw materials under buyer’s credit, according to a notification, issued by the Bangladesh Bank (BB) on Monday.
"To facilitate short term import finance, it has been decided that the authorised dealers (ADs) may, on behalf of industrial importers, issue repayment bank guarantees without BB's approval," the central bank said.
A repayment bank guarantee is a promise to cover a loss if a borrower defaults on a loan.
The BB, however, said that the guarantees without its approval should only be issued in favoure of the ITFC, an autonomous entity within the Islamic Development Bank (IDB) Group created to help improve trade of Islamic countries.
It also said that the short term buyer's credit would be given for up to 180 days for import of industrial raw materials for own use by the importers.
In the notification, the BB further said that the ADs would issue the repayment bank guarantees on sight basis, subject to adherence to all applicable credit norms and prudential parameters including single borrower exposure limit.
In case of invocation of the guarantees, the ADs shall report the BB giving full details of the circumstances leading to invocation and a copy of bill of entry relevant to the concerned imports, it added.
BBN/SSR/AD