Dhaka, Bangladesh (BBN) –The central bank of Bangladesh has relaxed its rules on import financing aiming to encourage importers to continue their businesses through additional support from the commercial banks.

Under the amended rules, the commercial banks will be allowed to provide post-import financing with validity for 150 days instead of the existing 90 days for edible oil, wheat and pulses only.

Besides, the Bangladesh Bank (BB), the country’s central bank, will increase the single borrower exposure limit on case to case basis only for investments in importing the three essential items.

The BB took the move against the backdrop of the falling trend in the opening of fresh letters of credit (LCs) against imports particularly the essential items in recent days.

On the other hand, most commercial banks have also expressed concern over the declining trend in the opening of fresh LCs for imports because it might hit their earnings by the end of this year.

“We’ve relaxed import financing rules only for the three essential items to ensure smooth supply in the local market,” a BB senior official told BBN in Dhaka.

The central bank issued a letter in this connection on Sunday asking banks to follow the amended rules for providing loans to the importers for importing such items, he added.

On Thursday last week, some bankers urged the central bank to provide policy support for import financing that would help importers to open fresh LCs.

“We’ll consider re-fixation of the single borrower exposure limit only for investment in the three items,” another BB official said, adding that the central bank took the move to facilitate the banks for strengthening investments for importing the items.

The central bank earlier re-fixed the limit on large loans of single borrower exposure by 15 per cent of respective banks equity to improve risk management in the banking sector.

The single borrower exposure limit on large loans has already been reduced from 50 per cent to 35 per cent that includes 15 per cent funding facilities.

Bankers, however, welcomed the BB’s latest move saying that it would help importers to open fresh LCs for the essential items by taking the advantage.

The commercial banks are now providing financial support to importers for importing goods through loan against trust receipt (TR) and loan against imported merchandise (LIM).

“The amended rules will help banks minimise their risk of default loans while the importers will be able to continue their businesses,” a senior official of a private commercial bank told BBN in the capital, Dhaka.

The opening of fresh LCs against imports drastically fell by over 43 per cent in October over that of the previous month because of substantial drop in prices of commodities in the global market.

Import LCs worth US$1.341 billion were opened in October last as against $2.357 billion in the previous month, according to central bank statistics.

The declining trend in opening of LCs for imports continued until the first week of this month, the central bank officials said.

Import LCs worth $327.82 million were opened in the first week of November against $530 million of the corresponding period of the previous year, the BB’s data showed.

The opening of LCs for import of some essential items, including rice, wheat, sugar, edible oils and pulses declined in terms of both value and quantity with the falling trend in the prices of the commodities in the international market persisting, they added.

BBN/SI/SS/AD-17November08-5:45 PM (BST)