To ensure the uninterrupted supply of onions and stabilise the prices on the local market, the Bangladesh Bank, Monday, allowed onion imports on credit for 90 days.
With the authorised dealer banks, onion importers will be allowed to open letters of credit (LC) on a 90 days deferred or usance basis, under the credit terms of suppliers or buyers, said the central bank in a circular issued Monday.
A central bank official told The Business Standard, "The interest rate will be calculated at six-month London Interbank Offered Rate (LIBOR) plus 3.5%. At present, the six-month LIBOR is 0.27% – which means the total interest will approximately be 3.77%."
Earlier on Thursday, the Bangladesh Bank also instructed banks to open LCs for the import of onions, with a minimum margin from the importers.
The official said, "Generally, importers must deposit 10% of a product's value as a margin while opening an LC. But for importing onions, we have instructed banks to take a minimum margin."
According to the central bank official, the minimum margin could be 1% so that the importers can invest the rest of their money in other sectors.
Onion prices, recently, have surged on both the local and international market. People in the last year have had to bear the brunt of skyrocketing prices of the key kitchen staple.
India, on September 14, banned onion exports with immediate effect prompting panic buying of the cooking essential in Bangladesh. People on the following day of the ban scrambled to stock up on onions so that they could survive the volatile market. This resulted in a steep surge in demand for onions.
The government responded to the price hikes with several measures including the state-owned trading corporation selling onions online.