The central bank asks authorised dealer (AD) bankers to insurance their export financing to cover risk of any deceitful dealings.
As an extra comfort, the banks have been advised to safeguard their financing from default risk through insurance coverage under credit- guarantee scheme available from insurance companies locally, according to a notification issued Sunday by the Bangladesh Bank (BB).
Currently, banks can extend financing facilities to exporters against 'usance export bills' by discounting in foreign currency.
"Banks will take the coverage with the consent of exporters," the alert note says.
Default-risk coverage by appropriate insurance may also be adopted against funded or non-funded facilities to exporters at pre-shipment stage, according to the notification.
"It will help banks to safeguard their export financing," a senior official of the Bangladesh Bank told the FE while explaining the main objective of the step about external trade financing.
The central bank also alerts banks that insurance coverage will not give waiver from realisation of export proceeds which ought to be repatriated within four months from the date of shipment as per requirement of the foreign-exchange regulations in force.
The Guidelines for Foreign Exchange Transactions (GFET) 2018 and subsequent circulars provide for the discounting of usance export bills in foreign currency at all-in-cost ceiling.
To extend post-shipment financing to exporters through bill discounting on recourse basis, the ADs need to conduct due diligence on parties concerned together with underlying export transactions in accordance with the instructions laid down in GFET and relevant notifications.
Reports have it that wrongdoings like misdeclaration on export and import, under-invoicing and over-invoicing and non-repatriation of export proceeds take place in some cases.
Economists are of the opinion that such misdealing in trade is one of the conduits for capital flight, apart from hundi and so.
