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LCs at zero margin to bridle price hike


Published : 11 Mar 2022 08:56 PM | Updated : 12 Mar 2022 03:22 PM

Bangladesh Bank has offered the opportunity to open Letter of Credit (L/C) or bonds at zero margin for curbing the commodity price hike.

Bangladesh Bank in a circular sent to the chief executives of all banks on Thursday said that LCs could be opened at zero margin to curb the rise in commodity prices before Ramadan. 

The LC commission should also be kept to a minimum level. LCs should be opened at zero margin for import of edible oil, chickpea, pulses, peas, onions, spices, dates, fruits, sugar and other daily necessities.

Usually the bill has to be paid after the goods arrive in the country. However, the customer has to deposit a portion of the value of the goods in the bank at the time of opening the import bond or LC which is called LC margin. 

This margin is determined on the basis of banker-customer relationship. If the customer's business relationship with the bank is good, the LC is opened with a minimum margin of 10. Again, if the customer is considered risky, then the LC is opened with 100 percent margin.

The circular titled 'Margins and Commissions on Credit for Importing Consumer Goods' states that the holy month of Ramadan and Eid-ul-Fitr are approaching. 

On the other hand, the prices of essentials dependent on imports are rising in market due to various uncontrollable conditions including the aftermath of the Covid-19 pandemic.

In the circumstances, the Central Bank has given two instructions to keep the prices at an affordable level and to ensure adequate supply of edible oil, gram, pulses, peas, onions, spices, dates, fruits, sugar and other essentials.

The two instructions are as follows: the rate of margin of imported bonds should be kept to a minimum and bonds can be opened at zero margin on the basis of banker-customer relationship.

Besides, the commission of imported debentures should be kept at the lowest possible level on the basis of banker-customer relationship.

The directive will be effective immediately and will remain in force till May 10, the circular said.

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