Banks asked to take insurance coverage for export financing
The Bangladesh Bank has advised banks to take insurance coverage against their financing to exporters.
Currently, banks can extend financing facilities to exporters against usance – the allowable period, permitted by custom, between the date of the bill and its payment – export bills by discounting in foreign currency.
As an extra comfort, the central bank in a circular on Sunday advised banks to safeguard their financing from default risk through insurance coverage under a credit guarantee scheme available from insurance companies locally.
Banks will take the coverage with the consent from exporters, the circular noted.
Default risk coverage by appropriate insurance may also be adopted against funded or non-funded facilities to exporters at the pre-shipment stage, it added.
The circular alerts banks that insurance coverage will not give a waiver from the realisation of export proceeds which need to be repatriated within four months from the date of shipment as per the requirement of foreign exchange regulations in force.
According to business insiders, the insurance coverage will facilitate banks to extend facilities to exporters smoothly since insurance coverage will safeguard the financing of banks.
