A senior official of a private bank said, “The dollar crisis is not over yet. But for the past few months, more than 5 billion dollars are being exported every month. Remittance inflow is also good. Due to these reasons, banks have good liquidity of dollars. As a result, we are now trying to open import LCs for products which we did not open earlier.”
As the liquidity situation of dollar in banks has improved, the opening of import letters of credit or import LCs and settlement have increased in March compared to February this year, according to policy makers of several state-owned and private banks.
According to central bank data, banks opened import LCs worth $6.13 billion in March, a 17 percent increase over February. An import LC of $5.28 billion was opened last February.
Meanwhile, the import LC opened in March 2023 was less than $6 billion. Only 3 import LCs have been opened in the last one year for more than 6 billion dollars.
A senior official of a private bank said, “The dollar crisis is not over yet. But for the past few months, exports have been exceeding 5 billion dollars every month. Remittance inflows are also good. Due to these reasons, the banks have good liquidity of dollars. As a result, we did not open import LCs for products which we did not open now. Trying to open.”
Stating that the opening of site LCs has increased as compared to earlier due to dollar in hand, he said, “25 percent of our LCs opened last 2/3 months were site, the rest was deferred. More than 50 percent of the LCs opened in March were site LCs.”
In case of site LC, payment must be made within one week. Such LCs are opened when banks have good dollar liquidity. On the other hand, deferred or delayed LC payments have a period of 90 to 180 days.
In most cases banks prefer to open deferred LC for import transactions. In other words, a significant portion of LCs opened for import transactions between September and December last year were disbursed in March.
Commenting that traders now want to open site LC more, a senior official of another bank said that it is difficult to be sure how the price of the dollar will be in the coming days. Traders have to suffer a lot of losses when the dollar price rises. Due to these reasons traders are more interested in opening site LC.
Commenting that the amount of LC opening will decrease in April, this banker further said, “Factories and banks were closed for a long time due to Eid. As a result, both LC opening and settlement will decrease in April.”
According to Central Bank data, during July-February of the current financial year, consumer goods import LC opening decreased by about 18 percent. Besides, capital machinery import LC opening fell by 19 percent, intermediate goods by 17 percent and industrial raw materials by 4 percent.
Association of Bankers, Bangladesh (ABB) chairman and managing director of BRAC Bank Salim RF Hussain said, “The dollar situation has become much more stable than before. The price of the dollar has also come down. Banks now have a good amount of dollars.”
“But we are seeing reduced demand for opening of import LCs, that is normal. Due to the stress in the overall economy and rise in inflation, consumer demand has reduced everywhere. That is why the overall demand for opening LCs has come down. Also, traders may also be thinking a little about business expansion now. ”
As the economy slowly recovers, consumer demand will also pick up. But he commented that it will take some time.
LC settlement increased by 14.5 percent
According to Central Bank data, import LCs were settled at $5.45 billion in March last month. This is 14.5 percent higher than in February. $4.76 billion was settled in February. Settlements fell by around 14 percent during July-February of the current financial year.
Banks say that they are able to open LCs, but traders say that they are not able to open enough LCs. Besides, the dollar price has to be paid more for LC settlement. Meanwhile, the banks said, the price of dollar is kept at 114 to 115 taka for LC settlement.
Citigroup is a major importer of consumer goods in the country. Biswajit Saha, director of corporate and regulatory affairs of the group, said, “We are still not able to open LCs as per demand. Besides, we have to keep margin to open LCs. This is creating pressure on us. On top of that, banks are giving us 1118 to 119 for LC settlement.”
At the time, he commented on the need to increase the ‘Single Party Borrower Limit’ for businessmen.
Talking to several banks, it is known that the banks are now calculating the amount of payment to be made in the future. Accordingly, new LCs are opening. As a result, banks are now under pressure of deferred LC payments.
Salim RF Hussain commented that the pressure of deferred LC payments has reduced compared to earlier, “We have learned from talking to the banks that the situation is now much better than before.”
Tags: Improvement dollar situation Import opening settlement increased March
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