FEPD-1 Circular No. 11: Development and facilitation of alternative trade finance mechanisms

Foreign Exchange Policy Department-1 Bangladesh Bank Head Office Dhaka www.bb.org.bd FEPD-1 Circular No.11 Date: June 11, 2026 All Authorized Dealers in Foreign Exchange in Bangladesh Development and facilitation of alternative trade finance mechanisms Dear Sirs, It has been observed that a significant proportion of Bangladesh's international trade transactions continue to be settled through Documentary Letter of Credit (LC) arrangements, which remain an important and widely accepted instrument for facilitating international trade. At the same time, developments in global trade finance practices have led to the increasing use of complementary trade settlement and financing mechanisms, such as Open Account Trade, Documentary Collection, Supply Chain Finance including factoring, receivables financing, and other structured trade finance solutions. These mechanisms provide additional options for market participants and may support greater flexibility in addressing diverse commercial requirements. 02. In order to facilitate the orderly development of a broader range of trade finance instruments and to align domestic practices with evolving international standards, it has been decided to support the gradual adoption of alternative trade finance mechanisms alongside conventional LC-based transactions. 03. Permissible trade finance mechanisms: ADs may facilitate the following trade finance instruments, subject to internal credit policies, due diligence, and foreign exchange regulations: (a) Advance payments: In terms of the provisions contained in paragraph 21 of FE Circular No. 31, dated July 31, 2025 and Circular Letter No. 31, dated September 25, 2025, receipt of advance payment against export transactions is permissible. In the case of imports, advance payment may be effected regardless of amount provided that ADs receive repayment guarantees from banks abroad. However, ADs may effect advance payments up to USD 20,000 or its equivalent (USD 50,000 in the case of payments from ERQ accounts), without repayment guarantee, under the general permission available pursuant to FE Circular No. 35, dated September 23, 2025. Requests for advance payments exceeding the prescribed threshold without repayment guarantees may be submitted to Bangladesh Bank for consideration on a case-to-case basis. In urgent cases, ADs may submit applications to Foreign Exchange Policy Department-1 through email during office hours; such requests shall ordinarily be disposed of within 48 hours upon receiving complete application. Cont’d to page-2

-2- (b) Open account trade (Exports): ADs may allow exporters to ship goods on open account credit terms, subject to statutory export realization period and compliance with the provisions contained in Part-D of FE Circular No. 31, dated July 31, 2025 and subsequent circulars. (c) Documentary collection: Pursuant to paragraph 3 of FE Circular No. 33, dated August 14, 2025, AD banks may facilitate export and import transactions under Documentary Collection arrangements, including Documents against Payment (DP) and Documents against Acceptance (DA), in accordance with internationally accepted practices including compliance with the latest version of the Uniform Rules for Collections (URC), as well as their internal risk management policies. In respect of imports conducted under purchase/sales contracts, AD banks may facilitate such transactions without LCs, subject to compliance with the provisions of Import Policy Order in force and foreign exchange regulations, as prescribed in Part-C of FE Circular No. 33, dated August 14, 2025. In such cases, ADs shall not assume any payment obligation unless separately contracted. 04. Supply Chain Finance (SCF): ADs are encouraged to develop SCF solutions based on genuine underlying trade flows. (a) Reverse factoring (Buyer-led financing): Under reverse factoring arrangements: (i) Financing may be extended against invoices approved by creditworthy buyers; (ii) Suppliers/exporters may receive early payment prior to invoice maturity; and (iii) The buyer shall repay the financing bank on the agreed maturity date. (b) Supplier financing/Buyer financing: ADs may extend financing to creditworthy importers for usance imports under sales/purchase contracts. Alternatively, accepted usance import bills of creditworthy importers may be discounted by ADs on a non-recourse basis to the supplier, enabling early realization of export proceeds without imposing additional financing costs on the importer. This facility may be provided in addition to, and without prejudice to, the arrangements permissible under paragraph 38 of FE Circular No. 33, dated August 14, 2025 and subsequent instructions in this regard. (c) Implementation requirements: ADs intending to introduce the above SCF structures shall inform the Foreign Exchange Policy Department-1 of Bangladesh Bank prior to launch and ensure implementation only after regulatory acknowledgement. The submission shall include product structure, risk framework, credit assessment methodology, exposure limits, approval hierarchy, monitoring arrangements, and relevant other pertinent issues. Cont’d to page-3

-3- 05. Digital trade facilitation and documentation framework: ADs are encouraged to adopt electronic and digitized trade processing systems to enhance efficiency, transparency, and operational resilience, and may accept electronic trade documents, including invoices and transport documents, subject to adequate verification mechanisms, acceptable assessment of counterparty and operational risks, and ensured legal validity and enforceability. Physical documents may be required where mandated by applicable laws, regulations, or contractual requirements, where transaction-specific risks warrant enhanced controls, or where legal enforceability depends on original documents. In case of electronic submission of export documents, the provisions of FEPD-1 Circular No. 01, dated January 06, 2026 shall be complied with. 06. Regulatory and Prudential Requirements: ADs shall adopt a prudent and risk￾based approach in facilitating non-LC trade finance arrangements and ensure the following: (a) robust credit assessment of buyers, importers, and respective parties, as applicable; (b) defined internal exposure limits based on approved risk rating systems; (c) maintenance of a complete documentation trail for all trade finance transactions; (d) continuous monitoring of exposures and settlement performance; (e) strict compliance with applicable AML/CFT requirements, foreign exchange regulations, tax laws, and other relevant regulatory provisions. The provisions of this circular are intended to facilitate the gradual diversification of trade finance mechanisms in Bangladesh. Nothing in this circular shall restrict the continued use of LCs, which remain a valid and widely accepted instrument for international trade transactions. Please bring the contents of the circular to the notice of all relevant stakeholders. Yours faithfully,

(Md. Harun-Ar-Rashid) Director (FEPD-1) Phone: 9530123