Banks fail to pay import bills, tarnish country’s image

The image of the country’s financial sector has been tarnished in the international arena as a good number of local banks have not made import payments on time.

The number of allegations placed by foreign embassies in this regard has been rising as the respective overseas lenders failed to get their export earnings in due time, according to a Bangladesh Bank report.

Against this backdrop, the central bank will raise the issue before the bankers’ meeting today.

Bangladesh Bank arranges the bankers’ meeting every three months with the managing directors of all local banks and the central bank higher-ups taking part.

The failure to settle import bills has increased the ‘add confirmation charge’ as well, the report said.

The charge for confirming letters of credit (LC) remains between 2 and 3 per cent annually depending on the client, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.”But the failure to settle import bills on time may push it up,” he added.

Confirmation fees are a security mechanism that eliminates risks for exporters.

When exporters are not satisfied with the LC-issuing bank, mainly for its insolvency risks, political issues in the importing country or both, they may seek an additional guarantee for the LCs.

Confirmation is a definite and legal undertaking from the importer’s bank to the exporter’s bank.

The central bank recently verified the unsettled import bills of 29 banks, of which the performance of some lenders was not good at all, the report said.

As of September last year, the overdue of unsettled import bills stood at $23.79 million.

Rahman said that banks should settle the import bills on time in the interest of the country’s image.

In some cases, there are some genuine reasons to not settle the foreign import bills but if there is no genuine cause, banks should not delay in making import payments.

“The sovereign rating of Pakistan is lower than Bangladesh but our confirmation charge is higher than theirs,” Rahman said, adding that the charge would decrease if local banks settle the import bills on time.

Besides, the banks did not settle the local import bills amounting to $31.22 million.

Local banks are engaging in disputes with each other to settle import bills. The number of allegations has also been rising to this end, according to the central bank report.

To address the issue, the central bank will give a strong message to local banks so that they settle both local and foreign import bills on time, an official of Bangladesh Bank said.