Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has imposed restrictions on short-term buyer’s and supplier’s credits from overseas sources for import to minimise repayment risk, officials said.

Under the restrictions, the payment will have to be repaid on quarterly basis, if the import value exceeds $0.5 million or the loan tenure is more than six months, according to a circular, issued by the Bangladesh Bank (BB) on Sunday.

 “The central bank has imposed such restriction on all external short-term buyer’s and supplier’s credits arrangements to minimise repayment risk and ensure discipline,” a BB senior official explined.

The BB’s latest move came against the backdrop of rising trend in deferred import payment in the recent months that may 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 past quarters,” the BB said in its circular.

Repayment outflows thereof are seen to have remained rather erratic, and not rising proportionately to accumulating aggregate liabilities, according to the circular.

“This tendency, if sustained, may cause abrupt bunching up of large FX (foreign exchange) funds outflow pressure in 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,” BB said.  

However, in these cases the repayment instalment due after the first quarter may be set lower than the subsequent ones, on prospective cash flow considerations, subject to being not less than one-tenth of the total amount payable, it added.

BBN/SSR/AD-01June14-11:55 pm (BST)