BRPD Circular Letter No. 25: L/C Margin on Import Financing

Bangladesh Bank
(Central Bank of Bangladesh)
Head Office
Motijheel, Dhaka-1000
Bangladesh.
Ref No.: BRPD Circular Letter No. 25
Date: 04 July 2022
20 Asharh 1429

To,
Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh.

Dear Sir,

Regarding the maintenance of cash margin for the establishment of Import Letters of Credit.

Reference is invited to BRPD Circular Letter No. 14 dated 10 May 2022 and BRPD Circular Letter No. 23 dated 02 December 2003 on the subject cited above.

2. Through paragraphs 2(a) and 2(b) of BRPD Circular Letter No. 14/2022, instructions were provided regarding the maintenance of margin for the establishment of Letters of Credit for the import of certain products. Now, in the context of the current global economic instability due to the long-term negative impact of Covid-19 and the continuation of the war situation in the outside world, instructions are hereby issued to redefine the cash margin rate for the establishment of Import Letters of Credit as follows, to keep the country's currency and credit management more consolidated:

a) 100% cash margin must be maintained for the establishment of Import Letters of Credit for the import of motor vehicles (sedan cars, jeeps, etc.), electrical and electronic home appliances, gold and gold ornaments, precious metals and pearls, ready-made garments, leather goods, jute goods, cosmetics, furniture and furnishing articles, fruits and flowers, non-cereal foods such as non-cereal food items, processed food items and beverages such as canned (tin) food, chocolate, biscuits, juice, soft drinks, etc., alcoholic beverages, tobacco, tobacco products or their alternative products, and other luxury goods;

b) A minimum of 75% cash margin must be maintained for the establishment of Import Letters of Credit for the import of all other products except child food, essential food items, fuel, life-saving medicines and equipment approved by the Directorate General of Health Services and items used for medical purposes, capital machinery and raw materials directly imported for local production-oriented industries and export-oriented industries, agricultural sector-related products, and essential items for use in government priority projects.

3. The margins of 100% and 75% respectively specified in paragraphs 2(a) and 2(b) must be collected from the customer's own source against the establishment of Import Letters of Credit for the imported goods. That is, no type of margin shall be provided against the establishment of Import Letters of Credit from any credit account existing in favor of the importer at the concerned bank or by creating any new credit account.

4. BRPD Circular Letter No. 14 dated 10 May 2022 is hereby repealed. Notwithstanding the repeal, the programs taken under the purview of the repealed Circular Letter prior to the issuance of this Circular Letter shall be deemed valid.

5. These instructions shall come into force immediately and remain in force until further instructions are issued.

6. These instructions are issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

Yours faithfully,

(Maksuda Begum)
Director (BRPD)
Phone: 9530252