The Bangladesh Bank (BB) has suspended its authorisation of 19 branches of 13 commercial banks allowing them to open fresh letters of credit (L/Cs) against imports.

The branches appear to have had their authorisation suspended by the central bank because documents related to previous trades seem not to have been submitted within BB's guidelines.

Bank obligations

Under existing guidelines importers must submit, in all cases of import payment, relevant exchange control copy of the customs bill of entry or invoice certified by the customs authorities within four months of sending remittances.

In the latest circular, the central bank says banks or authorised dealers must verify the previous import documents before opening new L/Cs.

Central bank concerns

This is the latest in a series of measures meant to address the BB's concerns about bills of entry - the written account of goods entered at the customs house - that do not tally with other documentation.

The central bank seems determined to deal rigorously with banks that step outside its directives on L/C openings. "We will take stern action against the banks if they fail to prove their sincerity in complying with our instructions," a senior central banker was reported in the Bangladeshi media as saying.

Called to account

The banks that have had authorisations to open fresh L/Cs suspended include three nationalised commercial banks, six private commercial banks, three Islamic banks and one foreign commercial bank.

The BB has ordered the banks' managing directors to explain why their banks had apparently failed to operate within central bank directives on L/C openings. The central bank will consider these explanations before deciding what actions to take.

Investigations

Several BB investigating teams have already started probing L/Cs opened recently with branches of authorised commercial banks to ensure their compliance with central bank guidelines according to official sources.

Currently, a total of 660 commercial bank branches known as authorised dealers may conduct fresh L/C business.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.