Issuance of letters of credit (L/Cs) by Nepalese banks has dropped significantly in the wake of restrictions imposed by India on shipments to Nepal.

Importers are reluctant to enter into L/C transactions for fear that goods on order will be stranded at the border of India and Nepal.

Traffic jam

Indian imports into Nepal from third countries routinely arrive through India's Kolkata port and are then shipped to Birgunj Dry Port in Nepal via the Indian border town of Raxual.

But clearance of imported goods at Raxual customs has essentially ground to a halt for the past two months due to new border controls imposed by India.

This has resulted in a 20 kilometre queue of some 4,000 trucks on the Indian side of the border waiting to enter Nepal.

L/C decline

Bankers have told local media that L/C issuance by commercial banks has declined by 60 per cent.

A branch manager of a commercial bank in Birgunj is reported as saying that very few traders were opening L/Cs for the usual Nepalese imports of industrial raw materials and foodstuff.

President of Birgunj Chamber of Commerce and Industry, Pradeep Kedia, has said importers are unwilling to take the risk of seeing their goods stuck in the traffic jam of trucks waiting to cross the border.

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