Banks asked to keep LC margin on daily essential imports at minimum level

The Bangladesh bank has ordered banks to allow opening of letters of credit (LC) with a minimum margin for importing daily essentials.

The decision has been taken to keep supplies and prices of daily essentials stable ahead of the upcoming Ramadan, according to a circular issued by the central bank on Sunday.

The order will remain effective until 15 May.

The LC margin will be kept at the minimum level for the imports of edible oil, grams, pulses, peas, onions, spices, dates, fruits, sugar and other consumer goods.

Bankers say a LC margin is determined based on bank-client relationship.

Mutual Trust Bank Managing Director Syed Mahbubur Rahman told The Business Standard that banks sometimes decide on zero margin for large and good importers. 

The minimum margin is generally fixed at 2-5%, meaning that importers can open LCs by paying Tk2-5 of the import value amounting to Tk100 to the banks and pay the remaining amount in phases. 

Bankers think that imports will now be easier and faster ahead of Ramadan. An importer can continue his imports even if he does have enough money with the minimum LC margin facility.

When asked about the central bank's circular, Golam Mawla, general secretary of the Bangladesh Edible Oil Wholesalers Association, told TBS that it would have been better had such instructions come earlier. There are only 15 days to go before Ramadan starts. Imports of consumer goods have already started a month before Ramadan.

He, however, welcomed the central bank's directive, saying if any initiative is taken timely, it benefits both traders and consumers.