Opening, settlement of import LCs rise in Oct: Bangladesh Bank

Banks opened LCs worth $5.42 billion in October—up by 14 per cent month on month (MoM), but down by $700 million from the August figure.

In October, import LC settlements also rose by 13 per cent over the previous month, whereas in September, these hit a 35-month low. LC openings in September also fell by 16.1 per cent over August.

The significant decline in LC openings in September was due to low remittances and uncertainty about the dollar rate in banks, according to domestic media reports. The figure was $6.17 billion in August. 

Merchandise exports plunged to a 26-month low to $3.76 in October, raising concerns among bankers about the dollar crunch and its impact on import LC openings and settlements.

The country’s central bank was concerned over a sharp decline in remittances in September this year that affected forex reserves and balance of payments. In October, the central bank allowed banks to bring in remittances at higher rates. As a result, remittances rebounded to nearly $2 billion in October.

Banks, however, are cautious due to the dollar crisis and future payment pressure and are offering 6-9 month deferred LCs, while traders prefer draft LCs that are payable within 7-10 days of LC opening.

Central bank data show LC settlements in October totalled $5.22 billion, higher than in September but lower than in July and August.

Nearly all LCs being disbursed now are deferred LCs opened 6-9 months ago, which are due to be paid as they mature, bankers reportedly said.

Short-term foreign loans were down by $1.23 billion in the July-September period, raising concerns about tighter liquidity and higher repayment pressure, central bank data show.

Short-term foreign loans stood at $12.49 billion in September, down from $13.66 billion in July.

ALCHEMPro News Desk (DS)