Delayed import payments damage Bangladesh's reputation: Bangladesh Bank
Although foreign currency reserves have generally improved, certain state-owned and Shariah-compliant banks are still failing to make import payments on schedule. In response, the central bank has issued a notice, cautioning that bank officials may face penalties for these delays.
In a notice issued yesterday, Bangladesh Bank (BB) expressed concern that delays and defaults in import payments harm Bangladesh's international reputation and increase import costs, burdening citizens already facing persistent price pressures. Overdue letter of credit (LC) payments have reached $400 million, with the majority owed by state-owned banks, according to BB officials speaking anonymously to The Daily Star.
Industry insiders attribute these payment delays to a combination of the ongoing dollar and taka crises, limited credit lines for importers, and a culture of non-payment. This issue was discussed in a meeting on Monday between the BB governor and managing directors of 17 banks.
In its notice, BB warned that delayed payments strain relationships with correspondent banks, driving up import costs. With improved foreign exchange reserves, the forex market is in a stronger position, the bank noted, making these payment delays “unacceptable” for both clean and accepted bills. The notice stated that late payments result in reputational damage for Bangladesh, leading to higher confirmation and trade credit costs.
An anonymous BB official added that some state-run and Shariah-compliant banks are repeatedly failing to settle import bills, leading to increased costs. Some banks now face confirmation charges of up to 4 percent—up from 2-2.5 percent—due to delays. Bangladesh spends roughly $100 million annually on confirmation charges, a security measure imposed by correspondent banks to mitigate export risks. Due to the sector's reputational issues, some foreign lenders have reduced or suspended credit lines to Bangladesh; for example, Mashreq Bank in Dubai has already scaled back its credit line.
Syed Mahbubur Rahman, CEO of Mutual Trust Bank, noted that LC confirmation charges range from 2.5 to 3 percent annually, but have risen due to failure to settle import bills on time. He pointed out that correspondent banks now scrutinize importers’ identities more closely. Rahman, a former chairman of the Association of Bankers, Bangladesh (ABB), added that in cases where importers fail to pay, some banks classify these as forced loans, creating liabilities they are reluctant to cover.
BB Measures to Address Delays
The central bank directed banks to clear outstanding import bills immediately and to ensure proper credit facilities are available for importers before issuing LCs. BB emphasized that usance imports should be funded through buyer’s credit, offshore banking operations, or the banks' own funds as per foreign exchange guidelines. The regulator warned that failure to make timely payments may lead to punitive actions, including holding responsible officials personally accountable.
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